The Fringe Benefits Tax (FBT) year-end is fast approaching and now is the time for businesses to review their obligations. Many business owners unknowingly provide fringe benefits without realising they may be liable for FBT. Failing to meet FBT requirements can lead to penalties and unnecessary tax payments.
This guide breaks down what FBT is, who needs to lodge a return, key exemptions, recent changes and how to prepare before the deadline. Don’t wait until the last moment, now is the time to get organised and ensure compliance.
What is Fringe Benefits Tax (FBT)?
Fringe Benefits Tax (FBT) is a tax that employers must pay on non-cash benefits provided to employees (or their associates, such as family members) in addition to their regular salary or wages. The FBT year runs from 1 April to 31 March, and businesses are required to lodge their FBT return and pay by 21 May if submitting directly to the ATO.
For businesses working with a registered tax agent, the deadline may be extended to 25 June if lodging electronically. However, it’s crucial to engage an accountant early to ensure all records are accurate and obligations are met on time.
Common Taxable Benefits Include:
- Company cars used for personal purposes
- Meal and entertainment expenses (tickets, events, corporate hospitality)
- Gym memberships, lifestyle perks, or gifts
- Loans or reimbursements to employees
- Housing and rent assistance
If your business provides any of these benefits, you may be liable for FBT.
Who Needs to Lodge an FBT Return?
Even if no FBT is payable, businesses should still lodge a nil return to avoid audits or compliance issues. Many businesses assume they don’t need to submit an FBT return, but lodging one ensures compliance and prevents the ATO from questioning whether any benefits were overlooked.
Recent Changes & Considerations for 2025
- Electric Vehicles & FBT Exemptions
The FBT exemption for eligible electric vehicles (EVs) continues to offer a significant tax-saving opportunity. Employers can provide eligible EVs to employees without incurring FBT, provided the car is:
- Zero- or low-emission (battery electric, hydrogen fuel cell, or plug-in hybrid electric)
- First sold after 1 July 2022
- Below the luxury car tax (LCT) threshold ($89,332 for fuel-efficient vehicles in 2024-25)
However, starting 1 April 2025, plug-in hybrid electric vehicles (PHEVs) will no longer qualify for the FBT exemption. Businesses with pre-existing binding agreements, such as a purchase or lease agreement before the deadline, will still be eligible for the exemption, as long as no changes are made. Any new or modified commitments after 1 April 2025 will lose the exemption, meaning the vehicle will be subject to FBT.
Employers considering PHEVs for salary packaging should review their agreements now to ensure they meet exemption conditions before the deadline. Fully electric and hydrogen fuel cell vehicles will continue to be exempt beyond 2025.
- Proposed $20,000 Entertainment Deduction
A proposal by the Liberal Party suggests a $20,000 tax deduction for business-related entertainment expenses, exempt from FBT. If passed, this could offer significant savings for small businesses and reduce compliance burdens. However, the proposal is not yet law, and its passage depends on the outcome of the next federal election. Even if passed, it would need to go through the full legislative process.
Until this is official, entertainment expenses provided to employees may still trigger FBT obligations. Businesses should track entertainment benefits carefully to avoid unexpected tax liabilities.
Common FBT Mistakes & How to Avoid Them
- Not tracking entertainment expenses properly: Meals, tickets, and client events may still be subject to FBT unless explicitly exempt.
- Incorrectly claiming work-related exemptions: Some items (like laptops) are only FBT-exempt if primarily used for work.
- Forgetting that FBT applies to directors: If directors receive non-cash perks, the company may still owe FBT.
- Not keeping records: The ATO requires businesses to maintain detailed records of benefits provided, including logbooks for company cars.
Review your records now to ensure everything is properly documented.
How to Prepare for FBT Before the Deadline
- Review benefits: Identify any perks provided to employees and directors that could trigger FBT.
- Check exemptions: Ensure that any work-related benefits meet the criteria for tax-free treatment.
- Keep detailed records: Track vehicle use, meal expenses, and all other benefits.
- Use salary packaging effectively: Structure benefits tax-efficiently to reduce FBT liability.
- Lodge an FBT return: Even if no FBT is due, submitting a nil return confirms compliance.
- Engage with your accountant early: With different deadlines depending on whether you use a tax agent, it’s important to prepare well in advance.
- Seek professional advice: FBT is complex, and expert guidance can help businesses avoid overpaying taxes.
Stay Ahead of the FBT Deadline
As the FBT year-end approaches, businesses should review their obligations now to avoid last-minute surprises. The recent EV exemption and potential changes to entertainment deductions make it more important than ever to track benefits carefully.
If you’re unsure about your FBT obligations or want to explore tax-saving opportunities, we can help. Get in touch today to ensure you’re compliant and minimize unnecessary tax payments.
Conclusion
Fringe Benefits Tax can be complex, but with careful planning and early preparation, businesses can navigate their obligations and take advantage of potential tax-saving opportunities, such as the EV exemptions. Engaging with a professional accountant can help ensure compliance and optimize your tax position, allowing your business to minimise FBT liabilities and avoid any unnecessary tax payments.
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How can we help?
If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au or arrange a time for a meeting so we can discuss your requirements in more detail.
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