Fringe benefits tax catches many small employers by surprise. A work ute taken home, a gym membership or a staff dinner can all create an FBT bill, and FBT is paid by the business, not the employee.
This guide explains how FBT works for the FBT year ending 31 March 2026, now lodged, and the current year ending 31 March 2027. It covers the rate, gross-ups, car benefits, the main exemptions, reportable fringe benefits and due dates, all checked against the ATO FBT rates and thresholds and the ATO lodgment guidance.
It is written for business owners, payroll staff and bookkeepers who provide any benefits beyond wages. If you are planning an end-of-year event, our guide to FBT on Christmas parties covers that in detail.
Key takeaways
- The FBT year runs from 1 April to 31 March, not 1 July to 30 June.
- The FBT rate is 47% for the years ending 31 March 2026 and 2027.
- Gross-up rates are 2.0802 (type 1, GST credits claimable) and 1.8868 (type 2).
- Report benefits on income statements when an employee’s total taxable value is more than $2,000.
- Self-lodgers must lodge and pay by 21 May; tax agent electronic lodgment is generally 25 June.
- FBT of $3,000 or more means quarterly instalments the following year.
FBT at a glance
| Item | FBT year ending 31 March 2026 | FBT year ending 31 March 2027 |
|---|---|---|
| FBT rate | 47% | 47% |
| Type 1 gross-up (GST credit claimable) | 2.0802 | 2.0802 |
| Type 2 gross-up (no GST credit) | 1.8868 | 1.8868 |
| Record keeping exemption threshold | $10,664 | $10,962 |
| Car parking threshold | $11.03 | $11.48 |
| Statutory or benchmark interest rate | 8.62% | 8.27% |
| Return due (self-lodger) | 21 May 2026 | 21 May 2027 |
Source: ATO – FBT rates and thresholds, ATO – Lodging your FBT return and paying, checked 9 October 2026.
What is fringe benefits tax?
FBT is a tax employers pay on certain benefits provided to employees, or to their associates such as a partner, because of their employment. It is separate from income tax and is worked out on its own FBT year.
The idea is to tax non-cash benefits roughly as if the employee had been paid extra salary to buy them. That is why the taxable value is grossed up before the 47% rate is applied.
What counts as a fringe benefit?
Common examples include:
- a work car, including a dual cab ute, available for an employee’s private use
- gym memberships and other paid personal expenses
- tickets to events or shows, and other entertainment
- loans at a low interest rate
- paying an employee’s school fees or rent
Wages, salary and super are not fringe benefits. Benefits provided to clients are not subject to FBT either.
How is FBT calculated?
The basic formula is: taxable value x gross-up rate x 47% = FBT payable.
- Use the type 1 rate of 2.0802 where you can claim a GST credit on the benefit, such as a car you bought with GST.
- Use the type 2 rate of 1.8868 where you cannot, for example school fees or residential rent.
Employee contributions paid from after-tax income reduce the taxable value. The ATO also offers calculators for specific benefit types.
How are car fringe benefits worked out?
A car fringe benefit generally arises when you provide a car you hold to an employee for private use. The ATO car fringe benefits guide for small business says a car garaged at the employee’s home is treated as available for private use, whether or not they have permission to use it privately.
Statutory formula or operating cost method
- Statutory formula: 20% of the car’s base value, adjusted for the days it was available and reduced by employee contributions. No logbook is needed.
- Operating cost: actual and deemed running costs multiplied by the private use percentage. You need a logbook covering a continuous 12-week period.
Utes and vans used for work, with only minor, infrequent and irregular private use, may be exempt. Under the electric cars exemption, zero or low emissions cars first held and used on or after 1 July 2022 are exempt where luxury car tax has not applied. Since 1 April 2025, plug-in hybrids no longer qualify unless an earlier binding commitment exists.
Which benefits are exempt from FBT?
| Benefit | FBT treatment |
|---|---|
| Laptops, phones, tablets mainly for work | Exempt work-related item |
| Protective clothing, tools of trade, software, briefcases | Exempt when mainly for work |
| Infrequent benefits under $300 each | Exempt if a minor benefit |
| Food and drink for employees on premises on a working day | Exempt |
| Eligible electric car | Exempt, but reportable |
| Ute with minor private use | May be exempt |
Source: ATO – Work-related items exempt from FBT, ATO – Minor benefits exemption, checked 9 October 2026.
For work-related items, larger employers are limited to one item with substantially identical functions per employee per FBT year. Businesses with aggregated turnover under $50 million are not limited. From 1 April 2027, salary sacrificed work-related items will no longer be exempt, which matters if you run salary sacrifice arrangements.
The minor benefits exemption needs a value of less than $300 and a benefit it would be unreasonable to treat as a fringe benefit, looking at how often and regularly it is given. Gifts are covered in our gift card and FBT guide.
What are reportable fringe benefits?
If an employee’s reportable fringe benefits total more than $2,000 in the FBT year, you must report the grossed-up amount using the type 2 rate. The ATO reportable fringe benefits page says this is done through Single Touch Payroll or on a payment summary, for the income year ending straight after the FBT year.
Meal entertainment, car parking you provide and some other benefits are excluded unless salary sacrificed. The amount is not assessable income for the employee, but it is used in some government income tests. Our payroll setup checklist covers STP more generally.
When do I lodge and pay?
- Self-lodgers: lodge and pay by 21 May (next business day if it falls on a weekend or public holiday).
- Tax agent, electronic lodgment: generally 25 June, if you are on the agent’s FBT client list by 21 May.
- Instalments: if your FBT was $3,000 or more, you pay quarterly instalments through activity statements the following year.
- No return needed but registered: send a notice of non-lodgment by the normal due date.
Worked example: a work car for the FBT year ending 31 March 2027
A business provides a car with a base value of $40,000, bought with GST, to an employee for all 365 days of the FBT year. The employee contributes $2,000 from after-tax pay.
Taxable value: $40,000 x 20% = $8,000, less the $2,000 contribution = $6,000.
Gross-up (type 1): $6,000 x 2.0802 = $12,481.20.
FBT payable: $12,481.20 x 47% = $5,866.16, due with the return by 21 May 2027 for a self-lodger.
Reportable amount: the $6,000 taxable value is over $2,000, so the employee’s income statement shows $6,000 x 1.8868 = $11,320.80.
Rule of thumb: Before giving staff anything other than wages and super, ask two questions: is it exempt, and if not, would a matching employee contribution or a cash pay rise cost the business less?
Common FBT mistakes
- Using the 1 July year. FBT runs from 1 April to 31 March.
- Forgetting home-garaged cars. A car garaged at home is treated as available for private use.
- Wrong gross-up rate. Type 1 applies only where you can claim GST credits; reportable amounts always use type 2.
- Assuming EVs need no reporting. An exempt electric car is still a reportable fringe benefit.
- Missing the instalment trigger. FBT of $3,000 or more brings quarterly instalments the following year.
FAQ about fringe benefits tax
When is the FBT year and when is the return due?
The FBT year runs from 1 April to 31 March. For the year ending 31 March 2027, self-lodgers must lodge and pay by 21 May 2027. If a tax agent lodges electronically, the due date is generally 25 June 2027, provided you are on the agent’s FBT client list by 21 May. Payment must reach the ATO by the due date.
What is the FBT rate for 2026 and 2027?
The ATO FBT rates page shows a 47% FBT rate for the FBT years ending 31 March 2026 and 31 March 2027. The type 1 gross-up rate is 2.0802, used where you can claim GST credits, and the type 2 rate is 1.8868, used where you cannot. These are the same rates as the year ending 31 March 2025.
Do I report fringe benefits on employee income statements?
Yes, if an employee’s reportable fringe benefits have a total taxable value of more than $2,000 in the FBT year. You report the grossed-up amount using the type 2 rate through Single Touch Payroll. Some benefits, such as meal entertainment and car parking you provide, are excluded unless salary sacrificed.
Is an electric car provided to an employee free of FBT?
It can be. The electric cars exemption applies to zero or low emissions cars first held and used on or after 1 July 2022, where luxury car tax has not applied. Plug-in hybrids stopped qualifying from 1 April 2025 unless an earlier binding commitment exists. The exempt benefit is still counted for reportable fringe benefits.
Are laptops and phones for staff exempt from FBT?
Portable electronic devices such as laptops, tablets and phones are exempt when provided mainly for work. Larger employers are limited to one item with substantially identical functions per employee per FBT year, but businesses with aggregated turnover under $50 million are not. From 1 April 2027, salary sacrificed work-related items will no longer be exempt.
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Nanak Accountants can review the benefits you provide, work out your FBT and reportable amounts and lodge your return for the year ending 31 March 2027. See our FBT return service or call 1300 626 258.
This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO FBT rates and thresholds, lodgment, reportable fringe benefits, exemptions and car fringe benefit pages on 9 October 2026. Rates and thresholds change, so confirm the current position before acting.
