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Never heard of Fringe Benefits Tax? You’re not the only one.
Don’t feel like you’ve been out of the loop if you’ve never heard of this tax before because it’s one of those sneaky taxes that doesn’t get much airtime, and yes, it’s just as important as the other big ones like income tax and GST, but we’re here to help you understand and learn more about it. First, we’ll cover what fringe benefits are (no, it’s not about haircuts), then dive into what Fringe Benefits Tax (FBT) is and why it matters for you and your business.
What are Fringe Benefits?
- Fringe Benefits is another name for what you call ‘employee benefits’ or ‘perks’. Think of them as non-cash rewards like a company car, free meals, discounts or even private health cover that sweeten the deal for working with a business.
- Some benefits are required by law (like retirement contributions or health plans in some countries), but others are totally up to the employer. These optional perks can include things like personal use of a work car, freebies or staff discounts.
- But here’s the catch—not all fringe benefits are taxable. Whether tax applies depends on the type of benefit and the tax laws in your country.
Now that we’ve given you an idea of what Fringe Benefits are, you’re probably wondering: Who actually pays the FBT? Is it tax deductible? When’s it due? Don’t stress, we’ve got all the answers coming up! 😉
What is Fringe Benefits Tax (FBT)?
- When employers provide fringe benefits to their employees, some of those perks are exempt, while others are subject to Fringe Benefits Tax (FBT).
- It’s also worth noting that FBT is separate from income tax. It’s calculated based on the taxable value of the benefits, and it’s reported and lodged on its own.
When is the FBT financial year?
- FBT runs on its own financial year, separate from the standard tax year. It starts on 1 April and ends on 31 March the following year.
- The ATO set it up this way to give employers extra time to gather the necessary information, calculate the value of any fringe benefits provided, and finalise everything before the usual 30 June income tax deadline. Because some benefits need to be valued or adjusted, having a separate FBT year helps simplify the process, especially when preparing employee payment summaries and staying compliant.
Who pays the FBT?
- The employer pays FBT.
How is FBT calculated in Australia?
- Calculating FBT is key to staying on the right side of the ATO. It involves three steps: first, work out the taxable value of the benefit. Then, apply a gross-up rate to reflect what the benefit would cost if it were paid as salary. Finally, apply the FBT rate (47%) to that grossed-up value. That’s the amount of FBT you’ll need to pay.
Is Fringe Benefits Tax deductible?
- Yes, employers can claim FBT as a business expense in your income tax return. However, the cost of the actual benefit may not always be deductible.
Types of Fringe Benefits
There are many types of fringe benefits that can be taxed, but in the music and entertainment industry, a few pop up more often than others. These include:
- Company cars used for personal travel
- Entertainment costs like shout meals, drinks or event tickets.
For a full breakdown of all taxable fringe benefits, check out the Australia Taxation Office (ATO) website.
Which cars are FBT exempt
Similar to other employee perks, not all vehicles are subject to FBT. Certain vehicles may be exempt, provided they’re only used for limited private purposes. These include:
- A single cab ute
- A panel van or goods van
- Any 4-wheel vehicle built to carry 1 tonne or more, or more than 8 passengers (including the driver)
It's important to make sure the vehicle use meets the ATO’s criteria to qualify for the exemption. We recommend checking out the complete list of vehicles eligible for the exemption on the Australian Taxation Office’s (ATO) website.
But wait, there’s more!
Thinking of going electric? Eligible EVs provided to employees can be exempt from Fringe Benefits Tax including costs like rego, insurance, and charging. Just make sure the car was first used after 1 July 2022, and note that plug-in hybrids lose the exemption from April 2025 unless already in use. It’s a win for the environment and your wallet!
❗If you’re a Calculated Matters client and thinking of buying an EV soon, have a quick chat with us before you buy—we’ll help you understand exactly how FBT applies to vehicles to ensure there are no compliance gaps down the track.
How FBT applies to food and drinks
Shouting your team lunch or drinks might seem like a simple gesture, but the ATO could view it as a fringe benefit, and that’s where FBT can come into play.
If you provide food or drink outside of work hours, off-site, or as part of entertainment (like at a pub, restaurant, or event), it can trigger Fringe Benefits Tax.
But not all snacks are taxed! Here’s the general rule of thumb:
✅ Usually exempt:
- Morning tea, coffee or snacks at the office
- Light meals during meetings or training on-site
🚫 FBT may apply:
- Team dinners at a restaurant
- Friday night drinks at the pub
- Catering at a staff party or event
It all comes down to where, why, and who it’s for—and whether it’s considered entertainment.
FBT can be a bit of a maze, but staying on top of it is key to avoiding penalties and keeping things running smoothly. If you’re in the music and entertainment industry and partner with us for a full business management service, we also take care of your FBT returns and declarations, helping you stay on top of your tax compliance.
To get started, simply fill out our Pre-Qualification Questionnaire on our website and we’ll be in touch shortly.
