Fringe benefits tax (FBT) is a tax employers pay on certain benefits they give employees in place of, or in addition to, salary. It is separate from income tax and is calculated on the taxable value of the benefit. The FBT year runs from 1 April to 31 March.
Common Fringe Benefits
- A car provided for private use, including through a novated lease
- Car parking
- Entertainment such as meals and events
- Paying an employee's private expenses, such as school fees or a gym membership
- Low-interest loans to employees
Some benefits are exempt, for example certain portable electronic devices used mainly for work, and eligible employers such as hospitals and charities receive concessions.
FBT and Novated Leases
With a novated lease, the car is a fringe benefit. The FBT cost is usually managed through the employee contribution method: part of your lease payment is made from after-tax salary, which reduces the taxable value of the benefit, often to nil.
Eligible electric vehicles can be exempt from FBT when provided through an employer, subject to conditions including a price cap. This exemption is why EV novated leases can be much cheaper than petrol ones. The conditions have changed before, so check the current rules before you commit.
See our guides on novated leases and electric car loans.
Who Pays
The employer is legally responsible for FBT. In a salary packaging arrangement, the cost is usually built into your package, so it matters to you as the employee.
FBT rates, thresholds and exemptions are set by the ATO. Confirm current details at ato.gov.au or with your employer's packaging provider.