Complete guide to Fringe Benefits Tax in Australia for 2025. What counts as a fringe benefit, the 47% FBT rate, common exemptions, and how it affects employees and employers.
Fringe Benefits Tax (FBT) is a tax paid by employers on certain non-cash benefits provided to employees (or their associates, such as family members) in connection with their employment. It exists because, without it, employers could provide tax-free perks instead of taxable salary, undermining the income tax system.
Common examples of fringe benefits include providing a work car for private use, paying an employee's private health insurance, giving low-interest loans, or covering school fees. If an employer provides these benefits, FBT may apply — even though the employee never directly receives cash.
See how salary packaging and fringe benefits affect your overall tax position.
Income Tax Calculator →This is the most misunderstood aspect of FBT. The employer is legally liable to pay FBT, not the employee. However, in practice, the cost is often passed on to the employee through a salary packaging arrangement, where the employee's overall remuneration package is structured to include the FBT cost.
Employees do not lodge an FBT return or pay FBT directly to the ATO. Instead, the value of certain fringe benefits may appear on the employee's income statement as a "reportable fringe benefits amount" — which affects other calculations like the Medicare Levy Surcharge and HECS-HELP repayments, even though it is not directly taxed as income.
The FBT rate is currently 47%, which aligns with the top marginal tax rate plus Medicare levy. This high rate exists to ensure providing benefits is not a more tax-effective way of remunerating employees than paying ordinary salary.
FBT is calculated on the "grossed-up" taxable value of the benefit, not the raw cost. This grossing-up accounts for the fact that the employer would have needed to earn more (and pay tax on it) to provide the equivalent after-tax benefit in cash. There are two gross-up rates depending on whether GST credits were claimable on the benefit (type 1: 2.0802, type 2: 1.8868 for the 2025-26 FBT year).
| Benefit Type | Example | FBT Treatment |
|---|---|---|
| Car fringe benefit | Company car available for private use | Taxable — calculated via statutory formula or operating cost method |
| Entertainment | Client lunches, staff parties, sporting event tickets | Often taxable — exemptions exist for minor/infrequent benefits |
| Living-away-from-home allowance | Accommodation for employees relocated for work | May be exempt or concessionally taxed depending on conditions |
| Loans | Interest-free or low-interest employee loans | Taxable on the difference between actual and benchmark interest rate |
| Expense payments | Employer pays a private expense (e.g. school fees, gym membership) | Generally taxable |
| Property benefits | Employer provides goods at a discount | Taxable on the discount value |
Several common benefits are exempt from FBT or receive concessional treatment, making them popular salary packaging inclusions:
Providing a car for an employee's private use is the most common fringe benefit in Australia. There are two methods to calculate the taxable value:
This method applies a flat 20% statutory rate to the car's base value, regardless of how much it is actually used privately. This is the simpler and more commonly used method.
Taxable value = Base value × 20% × (days available for private use ÷ days in FBT year)
This method calculates the taxable value based on actual running costs (fuel, registration, insurance, depreciation, interest) multiplied by the percentage of private use, determined by keeping a logbook for a minimum 12-week period.
If the total taxable value of fringe benefits provided to you exceeds $2,000 in an FBT year, your employer must report a "reportable fringe benefits amount" on your income statement (formerly group certificate/payment summary). This grossed-up amount:
Salary packaging (sacrificing part of your salary for fringe benefits) can be tax-effective in specific circumstances:
Always run the numbers for your specific situation — the right choice depends on your income, the benefit type, and your personal circumstances.
Use our FBT calculator to estimate the tax on car and other fringe benefits.
FBT Calculator →