If you provide perks like company cars, entertainment, or discounted goods to our employees, you could be on the hook for Fringe Benefits Tax (FBT). With the 2025 FBT year now in focus, it’s time to ensure you’re compliant and not paying more tax than necessary.
This guide will cover key FBT updates, common pitfalls, and strategies to reduce your FBT liability.
Fringe Benefits Tax is a tax employers pay on certain benefits provided to employees (or their associates) in place of salary or wages. The FBT year runs from 1 April to 31 March, and the tax rate for the 2025 FBT year remains at 47%—in line with the top marginal tax rate, including the Medicare levy.
FBT applies to a range of benefits, including:
- Company cars used for personal travel
- Entertainment expenses, like meals and tickets to events
- Low-interest loans to employees
- Discounted goods and services provided to staff
- Housing or living-away-from-home allowances
For a more detailed breakdown of FBT and how it works, check out our FBT guide for small businesses.
Electric Vehicles (EVs) & FBT Exemptions
One of the biggest FBT opportunities remains the EV exemption introduced in 2022. If your business provides eligible zero- or low-emission vehicles to employees, you may be exempt from FBT, provided the car’s original purchase price (GST-inclusive) was below the luxury car tax threshold ($89,332 for 2024–25).
🚨 Important: This exemption does NOT apply to plug-in hybrid vehicles purchased after 1 April 2025 unless an exemption was already in place.
Car Fringe Benefits: Logbooks & Compliance
If you provide company cars, the logbook method is crucial for reducing your FBT liability. The statutory method applies 20% private use, which can be costly. A well-maintained logbook that demonstrates mostly business use can significantly reduce or even eliminate your FBT liability.
💡 Pro tip: Ensure employees maintain a valid logbook for at least 12 weeks every five years and keep odometer readings up to date.
Entertainment Benefits: A Common Trap
Entertainment—including meals, drinks, and event tickets—can be tricky when it comes to FBT. If you’re providing these perks, you may be liable for FBT unless the minor benefits exemption applies (i.e., the benefit is less than $300 and infrequent).
🚀 Strategy: Instead of providing entertainment, consider giving gift cards or non-entertainment-related benefits, which may be FBT-free and still valued by employees.
Salary Packaging & FBT
Salary packaging can be a win-win for both businesses and employees when structured correctly. However, some benefits (like gym memberships or personal loans) attract FBT, while others (like superannuation contributions) do not.
📌 Action: Review any existing salary packaging arrangements before the FBT year ends to ensure they’re tax-effective and all required documentation is in place.
Reducing Your FBT Liability
✅ Use exemptions and concessions: The minor benefits exemption, work-related items (like laptops), and the EV exemption can help reduce FBT exposure.
✅ Maintain proper records: Logbooks, receipts, and written declarations can make a massive difference in how much tax you pay.
✅ Consider employee contributions: If employees contribute to the cost of a benefit (e.g., fuel costs for a company car), it can reduce the taxable value of the benefit.
✅ Switch to cash bonuses where appropriate: A small cash bonus may be more tax-efficient than an FBT-taxed benefit.
- 📅 31 March 2025: End of the 2025 FBT year—ensure records are up to date.
- 📅 21 May 2025: FBT return due date (or later if lodging via a tax agent).
- 🔍 Review your FBT exposure now to avoid last-minute surprises.
Not sure how to optimise your FBT position? We can help.
📞 Get in touch today to discuss your FBT strategy.