Figure: Fringe benefits tax year and lodgement sequence
Fringe benefits tax runs on its own calendar. The FBT year ends on 31 March, not 30 June, and the tax applies at 47% on the grossed-up value of the benefit. That combination makes a non-cash benefit more expensive than the wage it replaces, and catches employers who thought they were being generous rather than creating a liability.
The benefits employers most often miss
Four categories account for most unexpected liabilities.
A work vehicle garaged at an employee's home is generally available for private use, whether or not it is used that way. Availability is the test, not usage. This is the single largest source of FBT for small businesses and the one owners most often assume does not apply to them.
Entertainment — meals, functions, drinks, tickets — is a fringe benefit when provided to employees. Paying an employee's private expense, such as a phone bill or a professional membership in their own name, is an expense payment fringe benefit. And a loan to an employee at below the benchmark interest rate creates a loan fringe benefit for the difference.
Motor vehicles: two methods, two answers
Where a car benefit exists, there are two ways to value it and they frequently produce very different results.
The statutory formula applies a flat 20% to the car's base value, regardless of how much the car is actually driven privately. It requires almost no records, which is why most employers default to it.
The operating cost method takes the actual running costs for the year — fuel, insurance, registration, repairs, depreciation and deemed interest — and applies the private use percentage. It requires a valid logbook covering a continuous twelve-week period, which remains valid for five years unless circumstances change materially.
For a car that is genuinely mostly business, operating cost is usually far cheaper. For a low-value car with heavy private use, the statutory formula often wins. We calculate both and lodge on the lower.
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A twelve-week logbook takes about ten minutes a week and stays valid for five years. It is the highest-return administrative task available to most employers.
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Electric vehicles
Eligible battery electric vehicles priced below the fuel-efficient luxury car tax threshold are exempt from FBT. The exemption is genuine and substantial, and it is why so many salary-packaged vehicles are now electric.
Two qualifications. The value is still reportable on the employee's income statement, which affects things calculated on adjusted taxable income such as HECS-HELP repayments and family assistance. And the plug-in hybrid exemption closed to new arrangements from 1 April 2025 — existing committed arrangements were grandfathered, new ones are not.
Entertainment and the minor benefits exemption
A benefit under $300 that is provided infrequently and irregularly can be exempt as a minor benefit. The Christmas party often falls under it, as do occasional gifts.
The catch is that where entertainment is exempt from FBT, it is generally not deductible and you cannot claim the GST credit. Where you pay FBT on it, it becomes deductible and the credit is claimable. Neither treatment is automatically better; it depends on the amounts and your tax position. It is worth calculating both rather than assuming the exemption is a win.
The $300 threshold applies per benefit per employee, and associates such as spouses are counted separately, which is more generous than most people assume.
Employee contributions
An after-tax contribution from the employee reduces the taxable value of the benefit dollar for dollar. Contributing an amount equal to the taxable value eliminates the FBT liability entirely.
This is often the cheapest solution for a work vehicle with significant private use. The contribution is assessable to the employer and carries GST, so it is not free, but it usually costs materially less than the FBT it displaces.
The dates
The FBT year ends 31 March. Returns lodged by the employer are due 21 May. Lodging electronically through a registered tax agent generally extends that to 25 June, with payment due at the same time.
If you have no liability, you do not have to lodge — but you should document how you reached that conclusion. A file note explaining why no car benefit arose is a much better answer to a later review than silence.
What to do in March
Take odometer readings on 31 March for every vehicle. Confirm logbooks are current and still valid. Pull together the year's entertainment spend and identify who attended what. Check whether any employee loans or expense payments were made. And decide, before the year closes, whether employee contributions are worth making for the vehicles.
An hour in late March saves considerably more than the same hour in May.
Tax Visory Team
Chartered Accountants ANZ · Registered Tax Agents. Questions about this article? Book a free consultation.