Employers' Guide to FBT-exempt Benefits

If you provide your employees with fringe benefits in addition to their wages, you will likely have to pay Fringe Benefits Tax (FBT) to the ATO.

The key term in determining whether a benefit is subject to FBT is ‘personal use’. For example, if you provide an employee with a business-owned car that they use outside of work for private purposes, this would (in most cases) constitute a fringe benefit.

Here's how you can reduce your FBT liability.

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How to reduce your FBT liability

Benefits exempt from FBT

Certain items provided to employees are exempt from Fringe Benefits Tax, within limits. These include:

• Portable devices used primarily for work purposes but possibly used outside of work on occasion. Includes laptops, tablets, mobile phones, and GPS systems. Small businesses can claim FBT exemption for more than one device per employee, whereas larger businesses are limited to one.
• Work-related tools, such as tools of trade, software, protective clothing, and briefcases. For all businesses, the FBT exemption is limited to one item per FBT year per employee.
• Car parking - an FBT exemption for car parking benefits may apply for an employee with a disability.
• Travel to or from work using taxis or rideshares. The exemption is generally limited to a single trip only, but it may be extended in the case of sickness or injury.
• Retraining costs for employees facing redundancy. An exemption applies where you provide the training to help the employee find another job and the training is not related to their current job.
• Emergency assistance - includes provision of emergency supplies, repairs, and First Aid in the case of an accident, catastrophic event or serious illness.

Employee deductible benefits

Where you provide a benefit that the employee would have been able to claim as a tax deduction if they’d paid for it, the ‘Otherwise Deductible’ rule applies, and your liability reduces.

Examples might include home internet costs or study fees related to their work. Note that it’s crucial to determine whether the employee could have claimed the cost as a deduction in the first place. It may also be the case that only a portion of the cost would have been tax-deductible for them.

Employee contributions towards the benefit

Sometimes, employees agree to contribute to the cost of the benefit provided. In this case, the benefit’s value would be reduced by the portion they contribute, and your FBT liability would be reduced. However, you would still need to include their contribution in your taxable income.

Cash bonuses

Cash bonuses are not subject to FBT. This means you can reduce FBT by paying a worker the cash value of a benefit instead of providing the benefit itself. The employee would need to declare the cash as income on their tax return, though, so you may want to consider increasing the cash amount to cover their tax liability.

Minor benefits FBT exemption

This exemption applies where:

• the notional value of the item (i.e. its value if it was taxable) is less than $300, and
• the item is provided only occasionally or as a one-off, and
• it would be unreasonable to treat the item as a fringe benefit.

For example, gifts to an employee for a special occasion or the occasional lunch fall into this category.

Exempt motor vehicles 

While a car for private use is generally considered a taxable fringe benefit, this rule has some exceptions.

This includes where the car is a delivery or transport vehicle, and its private use is limited. Our article on FBT-exempt cars provides more information. Depending on their value and use, many electric vehicles are also FBT-exempt. Read our previous article on FBT-exempt EVs to learn more.

Record keeping and reporting

The FBT year runs from 1 April to 31 March. If you provide any taxable fringe benefits, you must keep accurate records and lodge an annual FBT Return with the ATO. You will also need to record the value of taxable fringe benefits provided to individual workers on their Income Statements at the end of the financial year.

FBT-exempt benefits are not reportable. You do not need to include these on your FBT Return or record them on employee Income Statements. See Chapter 20 of the ATO legal database for more information on FBT-exempt benefits.