Calculate fringe benefits tax using the statutory formula or operating cost method, with current gross-up rates and the electric car exemption conditions applied.
Estimates only. Complex arrangements — multiple benefits, capped exemptions, or part-year availability — may need a registered tax agent.
| Item | Amount |
|---|
FBT is paid by employers on the taxable value of non-cash benefits provided to employees. The FBT rate is 47% (aligned with the top marginal rate + Medicare levy). The FBT year runs 1 April to 31 March.
Type 1 (GST credit claimable by employer): Gross-up rate 2.0802
Type 2 (no GST credit): Gross-up rate 1.8868
Taxable value = Car base value × 20% × (days available ÷ 365) − employee contributions.
From 1 April 2025, electric vehicles under the luxury car tax threshold are FBT-exempt (no FBT payable on the car benefit).
Benefits with a taxable value under $300 and provided infrequently may be exempt from FBT.
Written and reviewed by Mohsin Iqbal · Last reviewed 4 August 2026 · Rates checked against published ATO sources
FBT is paid by the employer, not the employee, at 47% of the grossed-up taxable value of the benefit. The FBT year runs 1 April to 31 March, and returns are due 21 May.
FBT payable = taxable value × gross-up rate × 47%
Type 1 (GST credit claimable) → gross-up 2.0802
Type 2 (no GST credit) → gross-up 1.8868
A $45,000 company car available all year works out at $45,000 × 20% = $9,000 taxable value, grossed up to $18,722, giving $8,799 of FBT.
| Item | Rate | Applies |
|---|---|---|
| FBT rate | 47% | Unchanged through to the FBT year ending 31 March 2027 |
| Type 1 gross-up | 2.0802 | Where the employer can claim a GST credit on the benefit |
| Type 2 gross-up | 1.8868 | Where no GST credit is available |
| Statutory rate (cars) | 20% | Flat, regardless of kilometres travelled, since 1 April 2014 |
| Minor benefits exemption | Under $300 | Where provided infrequently and irregularly |
| Reportable threshold | $2,000 | Taxable value per employee per FBT year |
| Fuel-efficient LCT threshold | $91,661 | 2026–27; caps electric car exemption eligibility |
The 47% figure is not arbitrary — it matches the top marginal income tax rate of 45% plus the 2% Medicare levy. The whole design of FBT is to tax a benefit at the rate the employee would have paid had they received cash and bought the thing themselves.
The gross-up step confuses more people than any other part of FBT, and the logic behind it is worth understanding because it explains the size of the bill.
If an employee wanted to buy a $10,000 benefit from their own pocket, and they are on the top marginal rate, they would need to earn roughly $18,868 before tax to have $10,000 left. The gross-up converts the benefit back into that pre-tax equivalent so FBT lands at the same place income tax would have.
Type 2 is exact arithmetic: 1 ÷ (1 − 0.47) = 1.8868. Type 1 is higher because the employer also claimed back the GST, so the gross-up recovers that too.
| $10,000 benefit | Type 1 | Type 2 |
|---|---|---|
| Grossed-up value | $20,802 | $18,868 |
| FBT at 47% | $9,777 | $8,868 |
| Effective cost per $1 of benefit | $1.98 | $1.89 |
That last row is the number to remember. A fringe benefit costs an employer roughly twice its face value once FBT is paid. It is why benefits are usually structured as salary packaging with an employee contribution, or chosen from the exempt list, rather than simply handed over.
Cars are the most common fringe benefit and there are two ways to value them. You may use whichever gives the lower taxable value, but the operating cost method requires records.
Taxable value = base value × 20% × (days available ÷ 365) − employee contributions
Simple, needs no logbook, and applies a flat 20% regardless of how far the car travelled. "Days available" means days the car was available for private use, not days it was actually driven — a car parked at an employee's home over the weekend is available.
Taxable value = total operating costs × private use % − employee contributions
Operating costs include fuel, registration, insurance, servicing, plus deemed depreciation and interest. This method needs a valid logbook covering a continuous 12-week period, which then holds for five years unless circumstances change materially.
| Statutory formula | Operating cost | |
|---|---|---|
| Logbook required | No | Yes — 12 continuous weeks |
| Better when | Private use is high | Business use is high |
| Based on | The car's purchase value | What the car actually cost to run |
| Admin effort | Minimal | Considerable |
The practical rule: if a car is genuinely used for business most of the time, the logbook is worth keeping. A car with 80% business use has a taxable value of 20% of operating costs, which will usually beat 20% of the purchase price. For a car that mostly sits in a driveway, the statutory method is simpler and gives a similar answer.
The electric car exemption is the largest FBT concession available, and it is also the area where out-of-date information does the most damage. Two changes have already taken effect and two more are scheduled.
| Vehicle | Exempt? | Conditions |
|---|---|---|
| Battery electric | Yes | Below the fuel-efficient LCT threshold, first held and used on or after 1 July 2022, never subject to LCT |
| Hydrogen fuel cell | Yes | Same conditions |
| Plug-in hybrid | No, for new arrangements | Ceased 1 April 2025. Continues only where the car was used or available before that date under an existing commitment |
| Conventional hybrid | No | Never qualified |
| Motorcycles, scooters | No | Not cars for FBT, even when electric |
The price cap catches people out most often. An electric car must sit below the fuel-efficient luxury car tax threshold at its first retail sale — $91,661 for 2026–27, up from $91,387 the year before. Above that, the exemption simply does not apply and normal FBT is payable at the full rate. Buying a second-hand EV means checking whether LCT was ever payable on it in the past.
Further changes have been announced to phase the exemption down. The following reflects legislation and announcements current at August 2026 and could change. From 1 April 2027 the full exemption is expected to be limited to electric cars under $75,000, with cars between that and the LCT threshold receiving a 25% FBT discount instead. From 1 April 2029 the full exemption is scheduled to be replaced entirely by a 25% discount for all eligible electric cars. Existing lease arrangements have been flagged as unaffected. If you are structuring a novated lease, the timing matters as much as the vehicle.
One point that is widely missed: an exempt car still has to be reported. The benefit attracts no FBT, but its grossed-up value still counts towards the employee's reportable fringe benefits amount, which affects income tests for things like the Medicare levy surcharge, family assistance and HECS-HELP repayments.
Some benefits carry no FBT at all, and structuring around them is entirely legitimate.
That last one, the otherwise deductible rule, is the most useful and the least understood. If an employer pays for a work-related course the employee could have claimed personally, the taxable value drops to nil. It is a rule about what the employee could have deducted, not what they did.
| Employer | Employee | |
|---|---|---|
| Pays the FBT | Yes | No |
| Lodges the return | Yes, by 21 May | No |
| Keeps the records | Yes, five years | Logbook if applicable |
| Sees it on their income statement | — | Yes, if over $2,000 taxable value |
| Pays income tax on it | — | No |
| Affected in income tests | — | Yes |
Employees do not pay FBT and do not pay income tax on a fringe benefit. But a reportable fringe benefits amount above $2,000 appears on their income statement, grossed up at the lower Type 2 rate regardless of which type the benefit was, and it counts in the income tests for the Medicare levy surcharge, HECS-HELP repayments, family tax benefits and child support.
This is why salary packaging is not free money. A packaged car can reduce taxable income while raising the reportable amount, and the second effect can undo part of the first depending on the employee's circumstances.
| If you are | What you need from this page |
|---|---|
| A small business owner | Whether the ute your employee garages at home, or the Christmas function, has created an FBT liability you did not know about |
| A payroll or finance officer | The taxable value and grossed-up figure for the annual return, and which employees cross the $2,000 reportable threshold |
| An accountant or BAS agent | A quick cross-check of statutory versus operating cost before advising a client which method to elect |
| Considering a novated lease | Whether the car qualifies for the electric car exemption, and what the FBT costs if it does not |
| An employee offered a packaged car | The reportable amount, which affects your Medicare levy surcharge and HECS repayments — see the employee guide |
What is fringe benefits tax?
A tax employers pay on non-cash benefits given to employees or their associates in connection with employment. It is separate from income tax, assessed on the employer at 47% of the grossed-up taxable value, and administered under the Fringe Benefits Tax Assessment Act 1986.
How do you calculate FBT?
Multiply the taxable value of the benefit by the gross-up rate, then by 47%. Use 2.0802 if you can claim a GST credit on the benefit, or 1.8868 if you cannot. A $10,000 Type 1 benefit grosses up to $20,802 and attracts $9,777 of FBT.
What is the current FBT rate?
47%, unchanged across the FBT years ending 31 March 2023 through 31 March 2027. It matches the top marginal income tax rate of 45% plus the 2% Medicare levy, so a benefit is taxed at the rate the employee would have paid on the equivalent cash.
Who pays fringe benefits tax, the employer or employee?
The employer. Employees pay no FBT and no income tax on the benefit itself. However, if the taxable value exceeds $2,000 in an FBT year, a grossed-up reportable amount appears on the employee's income statement and counts in various income tests.
When is the FBT year and when is the return due?
The FBT year runs 1 April to 31 March, which differs from the income tax year. Returns and payment are due by 21 May, or later if you lodge through a registered tax agent. If last year's liability was $3,000 or more, you pay four quarterly instalments.
What is the difference between Type 1 and Type 2 benefits?
Type 1 is where the employer can claim a GST credit on the benefit, and grosses up at 2.0802. Type 2 is where no GST credit is available, and grosses up at 1.8868. The higher Type 1 rate exists because the gross-up also recovers the GST the employer claimed back.
Are electric cars exempt from FBT?
Battery electric and hydrogen fuel cell cars are exempt if first held and used on or after 1 July 2022 and valued below the fuel-efficient luxury car tax threshold — $91,661 for 2026–27. Above that threshold the exemption does not apply. Plug-in hybrids ceased to qualify for new arrangements from 1 April 2025.
Do plug-in hybrids still get the FBT exemption?
Not for new arrangements. From 1 April 2025 a PHEV is no longer a zero or low emissions vehicle under FBT law. The exemption continues only where the car was used, or available for use, before that date under a commitment already in place, and then only for the life of that arrangement.
Is an exempt electric car still reportable?
Yes. No FBT is payable, but the grossed-up value still counts towards the employee's reportable fringe benefits amount if it exceeds $2,000. That figure appears on their income statement and affects the Medicare levy surcharge, HECS-HELP repayments and family assistance income tests.
What is the statutory formula method?
The simpler of the two car valuation methods: base value × 20% × days available ÷ 365, less any employee contributions. It needs no logbook and applies a flat 20% regardless of distance travelled. Days available means available for private use, not days actually driven.
When is the operating cost method better?
When business use is high. Taxable value is total operating costs multiplied by the private use percentage, so a car used 80% for business has a taxable value of 20% of running costs. It requires a valid logbook covering a continuous 12 weeks, which then holds for five years.
Does an employee contribution reduce FBT?
Yes. Amounts the employee pays towards the benefit reduce the taxable value dollar for dollar, and the taxable value cannot go below zero. Contributions are usually made from after-tax salary, and the employer generally has to account for GST on them.
What is the minor benefits exemption?
Benefits under $300 in taxable value are exempt where they are provided infrequently and irregularly. Both conditions matter — a $250 gift given every month is neither infrequent nor irregular, so the exemption would not apply.
Is a work laptop or phone subject to FBT?
Generally no. Portable electronic devices used primarily for work are exempt, and small businesses may provide more than one similar item in an FBT year. The test is primary work use, so a device bought mainly for personal use would not qualify.
What is the otherwise deductible rule?
Where an employee could have claimed a tax deduction had they paid for the benefit themselves, the taxable value is reduced by that amount, often to nil. An employer-funded work-related course is the common example. It turns on what the employee could have deducted, not what they actually claimed.
Do I need to register for FBT?
If you provide fringe benefits with a taxable value that will result in an FBT liability, yes. Register with the ATO, lodge an annual return by 21 May and keep records for five years. Many small employers provide benefits without realising they have triggered an obligation.
How much does a fringe benefit really cost an employer?
Roughly twice its face value once FBT is paid. A $10,000 Type 1 benefit costs $19,777 in total. This is why benefits are usually structured with employee contributions or drawn from the exempt list rather than simply provided.
Is a car parked at an employee's home a fringe benefit?
Usually yes. The test is whether the car was available for private use, not whether it was driven privately. A work vehicle garaged at home overnight is generally treated as available, which is why days available rather than days driven appears in the statutory formula.