Fringe Benefits Tax (FBT) Guide Australia FY2025-26

What Is Fringe Benefits Tax (FBT)?

Fringe Benefits Tax is a 47% tax paid by employers on the taxable value of non-cash benefits provided to current, former, or future employees in connection with their employment.

FBT operates as a separate tax system from income tax. The employer — not the employee — lodges the FBT return and pays the liability directly to the ATO. The FBT year runs from 1 April to 31 March, which differs from the standard income tax year of 1 July to 30 June. Employers lodge FBT returns and remit payment by 21 May each year (or 25 June if lodged through a registered tax agent).

A "fringe benefit" is any non-salary benefit provided to an employee. Common examples include company cars, private health insurance premiums paid by the employer, gym memberships, and discounted loans. Even benefits provided to an employee's associate — such as a spouse or child — attract FBT if the benefit arises from the employment relationship. Employers who provide fringe benefits totalling more than $2,000 in taxable value in a single FBT year must register for FBT with the ATO. To understand how fringe benefits interact with your overall salary, use our Take-Home Pay Calculator for a complete after-tax breakdown.

How Is FBT Calculated?

FBT is calculated by "grossing up" the taxable value of a fringe benefit to its pre-tax equivalent, then applying the 47% FBT rate to that grossed-up amount.

Grossing up converts the benefit's value into the gross salary an employee would need to earn to purchase the same benefit after tax. The ATO uses two grossing-up methods depending on whether the employer claims GST credits.

Type 1: Benefits Where the Employer Claims a GST Credit

Type 1 grossing up applies when the employer is entitled to a GST credit on the benefit. The Type 1 gross-up rate for the FBT year ending 31 March 2026 is 2.0802. The formula is:

FBT payable = Taxable value x 2.0802 x 47%

A benefit with a taxable value of $1,000 results in a grossed-up value of $2,080.20 and FBT of $977.69.

Type 2: Benefits Where No GST Credit Is Available

Type 2 grossing up applies when the employer cannot claim a GST credit (for example, GST-free supplies such as residential accommodation). The Type 2 gross-up rate is 1.8868. The formula is:

FBT payable = Taxable value x 1.8868 x 47%

The same $1,000 benefit under Type 2 produces a grossed-up value of $1,886.80 and FBT of $886.80. Employers calculating the true cost of employee benefits, including FBT, can model figures using our Employer Cost Calculator.

What Are the Common Types of Fringe Benefits?

The ATO classifies fringe benefits into 13 categories, each with specific valuation rules, exemptions, and reporting requirements.

Car fringe benefits are the most common category, accounting for the majority of all FBT revenue collected. For a detailed breakdown of how novated leasing reduces the taxable value of car benefits, see our Novated Lease Guide. To structure a tax-effective benefits package around FBT, employees should also read our Salary Packaging Guide.

Common FBT Benefits and Their Treatment

The table below summarises the most common fringe benefits employees actually receive, the gross-up Type that applies, the standard ATO treatment, and whether the benefit is reportable on the employee's income statement.

FBT Calculation Worked Example

The example below grosses up a $5,000 GST-creditable (Type 1) benefit to its taxable value and calculates the employer's FBT liability for FY2025-26.

For a Type 2 benefit (no GST credit), Step 2 would use the lower 1.8868 factor: $5,000 × 1.8868 = $9,434, and the FBT would be $9,434 × 47% = $4,433.98 — about $454 less than the Type 1 equivalent for the same underlying benefit value.

FBT vs Income Tax — Who Pays?

FBT and income tax are two separate Australian tax regimes. The employer pays FBT on the grossed-up taxable value of non-cash benefits at the 47% rate. The employee pays income tax only on cash wages and salary at their marginal income tax rate, with the 2% Medicare levy on top.

However, the employee may still see fringe benefits reported on their PAYG income statement as a Reportable Fringe Benefits Amount (RFBA). The RFBA is the grossed-up taxable value, and while it is not taxed again, it is added to your adjusted taxable income for the purpose of:

• HECS-HELP repayments — RFBA counts toward the $69,528 marginal-system threshold; model the impact with the HECS-HELP Calculator.
• Medicare Levy Surcharge (MLS) — RFBA can push your income above the $105,000 singles threshold, triggering 1%–1.5% MLS unless you hold appropriate private hospital cover.
• Super co-contribution — RFBA reduces eligibility for the government super co-contribution on after-tax personal contributions.
• Family Tax Benefit and Centrelink income tests — RFBA counts toward income-tested family assistance entitlements.
• Division 293 tax — for high-income earners with combined income plus low-tax super above $250,000.

This is why salary packaging quotes always model the combined impact on take-home pay and RFBA, not just the headline tax saving.

What Are the FBT Rates and Thresholds for FY2025-26?

The FBT rate is 47% for the FBT year ending 31 March 2026, equal to the top marginal income tax rate of 45% plus the 2% Medicare levy.

The FBT rate has remained at 47% since 1 April 2017. The benchmark interest rate and car parking threshold are indexed annually. For a full picture of Australian income tax brackets and how your marginal rate compares to the FBT rate, refer to our Income Tax Calculator.

Who Pays FBT — Employer or Employee?

The employer pays FBT directly to the ATO — it is never deducted from an employee's pay.

FBT is a separate employer tax obligation, distinct from PAYG withholding, superannuation guarantee contributions, and payroll tax. The employer calculates the total taxable value of all fringe benefits provided during the FBT year (1 April to 31 March), grosses up the amount, applies the 47% rate, and remits the liability. The employer can claim an income tax deduction for the FBT paid.

Some employers pass the cost of FBT to employees through "employee contribution" arrangements. An employee can make after-tax contributions toward the cost of the benefit, which reduces the taxable value and therefore the FBT liability. This is common with novated leases and salary sacrifice arrangements. Employees considering salary packaging should review our Salary Sacrifice Guide to understand how employee contributions reduce FBT exposure.

What FBT Exemptions and Concessions Apply?

Certain fringe benefits are fully exempt from FBT, and others receive concessional treatment that reduces the taxable value to zero or a lower amount.

Fully Exempt Benefits

• Portable electronic devices primarily for work — one laptop, one tablet, and one phone per FBT year
• Minor benefits under $300 that are infrequent and irregular (e.g., a Christmas ham, occasional taxi fares)
• Eligible electric vehicles under the Electric Car Discount — battery electric vehicles first held and used on or after 1 July 2022 (plug-in hybrids only under arrangements entered into before 1 April 2025), with a value at first retail sale below the luxury car tax limit for fuel-efficient vehicles ($91,661 for FY2026-27)
• Work-related items including protective clothing, tools of trade, briefcases, and software
• Employer contributions to complying super funds (these are taxed under the superannuation regime, not FBT)
• Certain relocation expenses for employees moving to a new work location

Capped Exemptions for NFP Employers

Not-for-profit organisations, public hospitals, and charities receive capped FBT exemptions. Public benevolent institutions (PBIs) and health promotion charities have a grossed-up cap of $30,000 per employee per FBT year (about $15,900 of GST-free benefits such as rent). Public and not-for-profit hospitals and public ambulance services receive a cap of $17,000 (about $9,010). A separate $5,000 grossed-up cap applies to salary-packaged meal entertainment and entertainment facility leasing. Benefits within the caps are exempt; benefits exceeding them attract FBT at the standard 47% rate. Rebatable employers get a 47% rebate, not an exemption, on up to $30,000 per employee.

Reduction Through Employee Contributions

Employees can make after-tax (post-tax) contributions toward the cost of a fringe benefit. Each dollar contributed reduces the taxable value of the benefit by one dollar. This is the most common strategy for reducing FBT on car fringe benefits and novated leases.

How Is FBT Calculated on a Company Car? (Worked Example)

A company car with a base value of $50,000 generates an annual FBT liability of $9,777 under the statutory formula method when the employer claims GST credits.

Step-by-Step: Statutory Formula Method

1. Determine the car's base value: $50,000 (GST-inclusive cost price minus any dealer delivery charges already exempt)
2. Apply the statutory fraction: $50,000 x 20% = $10,000 (this is the taxable value of the car fringe benefit)
3. Subtract any employee contributions: Assume $0 post-tax contributions, so taxable value remains $10,000
4. Gross up the taxable value: $10,000 x 2.0802 (Type 1) = $20,802
5. Apply the FBT rate: $20,802 x 47% = $9,776.94

The employer pays $9,777 in FBT to the ATO for this car. The $20,802 grossed-up amount also appears on the employee's income statement as reportable fringe benefits. If the employee made post-tax contributions of $3,000 toward the car, the taxable value drops to $7,000, reducing FBT to $6,844 — a saving of $2,933.

Operating Cost Method Alternative

The operating cost method calculates FBT based on actual running costs (fuel, insurance, registration, servicing, depreciation) multiplied by the private-use percentage. This method requires a valid 12-week logbook. Employees who drive more than 15,000 km per year for business purposes typically pay less FBT under the operating cost method than the statutory formula. Employers who want to compare the total cost of providing a company car, including superannuation and PAYG, should use our Employer Cost Calculator.

How Does FBT Affect Your Tax Return?

FBT does not create an additional tax liability for employees, but the Reportable Fringe Benefits Amount (RFBA) on your income statement affects income-tested thresholds for government benefits, surcharges, and obligations.

When fringe benefits exceed the $2,000 grossed-up threshold, the employer must report the grossed-up taxable value as RFBA on your income statement (formerly payment summary). The ATO uses your "adjusted taxable income" — which includes taxable income plus RFBA, reportable super contributions, and certain other items — to determine:

• Medicare Levy Surcharge (MLS) liability — RFBA pushes your adjusted taxable income above the $105,000 singles threshold, triggering a 1%, 1.25%, or 1.5% surcharge if you lack private hospital cover
• HECS-HELP repayment obligations — RFBA counts toward the $69,528 compulsory repayment threshold for FY2026-27
• Centrelink income test — RFBA is included in the income test for Family Tax Benefit, child care subsidy, and other income-tested payments
• Division 293 tax — high-income earners with combined income and low-tax super contributions above $250,000 pay an additional 15% tax on concessional super contributions

The RFBA itself is not taxed again in the employee's hands — it is used solely as a measure of adjusted taxable income. For details on how HECS repayments interact with your adjusted taxable income, use our HECS-HELP Calculator.

What Changed for FBT in FY2025-26?

The FBT rate remains at 47% for the FBT year ending 31 March 2026, with updated benchmark interest rates, car parking thresholds, and continued EV exemptions.

• Benchmark interest rate increased to 7.77% for the FBT year ending 31 March 2026, up from 7.74% in the prior year — this increases FBT on employer-provided loans
• Electric Car Discount continues — eligible zero and low-emissions vehicles remain FBT-exempt, with the luxury car tax threshold for fuel-efficient vehicles at $91,661 for FY2026-27
• Car parking threshold updated to $10.40 per day — employer-provided parking below this threshold does not attract FBT
• Stage 3 tax cuts do not affect FBT — the FBT rate remains pegged at the top marginal rate (45%) plus Medicare levy (2%), unchanged since 2017
• Gross-up rates unchanged — Type 1 remains at 2.0802 and Type 2 at 1.8868 because the FBT rate has not changed

The ATO publishes updated FBT rates and thresholds each year in February. Employers should review fringe benefit arrangements annually to capture any threshold changes and ensure compliance with reporting obligations.

What Are the Key FBT Dates and Deadlines?

The FBT year runs from 1 April to 31 March, and the key annual lodgement date is 21 May (or 25 June via a registered tax agent).

Late lodgement of an FBT return attracts a failure-to-lodge penalty of $364 per 28-day period (1 penalty unit from 1 July 2026), up to a maximum of 5 penalty units, multiplied for medium and large withholders. Interest on late payment is calculated at the general interest charge rate published by the ATO. For a full timeline of Australian tax obligations across the financial year, see our Tax Calendar.

Related Resources

These Australian tax calculators and guides provide additional detail on topics connected to fringe benefits tax, salary packaging, and employer obligations.

• Novated Lease Guide — how novated leasing works, ECM vs statutory method, and when a novated lease saves you tax
• Salary Sacrifice Guide — salary packaging strategies for super contributions, cars, and other benefits
• Salary Sacrifice Calculator — model the tax savings from salary sacrificing into super or other benefits
• Employer Cost Calculator — calculate the total cost of employing someone, including superannuation, payroll tax, WorkCover, and FBT
• Superannuation Guide — understand how the 12% SG rate for FY2025-26 interacts with salary sacrifice and fringe benefits
• Income Tax Calculator — see how Australian income tax brackets and the Medicare levy affect your take-home pay

Frequently Asked Questions