Fringe Benefits Tax (FBT) & What You Need to Know for the 2025 FBT Year

18 Mar

As the FBT year comes to a close on 31 March 2025, now is the time for business owners to review their employee benefits and assess their potential Fringe Benefits Tax (FBT) liability. The Australian Tax Office (ATO) has ramped up its scrutiny of FBT compliance, with many employers unaware they may be liable for tax on non-cash benefits provided to employees.

At Strategem Financial Services, we’re here to help you navigate these complexities so you can ensure compliance and avoid unnecessary tax liabilities.

Fringe Benefits Tax (FBT) Strategem Financial Services

What is Fringe Benefits Tax (FBT)?

FBT is a tax employers pay on certain benefits provided to employees in addition to their salary or wages. These benefits can be offered directly by the employer or through third parties and can include:

Private use of business vehicles
Discounted loans to employees
Covering personal expenses
Providing accommodation or living-away-from-home allowances
Entertainment expenses such as meals, events, and recreational activities
Salary sacrifice arrangements

FBT was introduced to ensure that non-cash benefits provided by businesses are taxed fairly, preventing employers from minimising income tax obligations by offering perks instead of wages.

Does Your Business Have an FBT Liability?

Not sure if your business is affected by FBT? Ask yourself these key questions:

Do your employees use business-owned or leased vehicles for personal travel, including commuting?
Have you provided employees with loans at reduced interest rates?
Have you covered or reimbursed private expenses for employees?
Do you provide housing, rent assistance, or living-away-from-home allowances?
Have you offered entertainment benefits such as meals, travel, or event tickets?
Do your employees have salary sacrifice arrangements in place?
Have you supplied goods or services to employees at a discounted rate?

If you answered “yes” to any of these, you may have an FBT liability and should review your arrangements before the 31 March 2025 deadline.

Common FBT Areas of Confusion

1. Motor Vehicles and FBT

If a business-owned vehicle is made available for an employee’s personal use—including travel between home and work—FBT is likely to apply. However, there are exceptions:

If a vehicle is home-garaged but not driven at all or only used briefly for maintenance purposes, there may be no FBT liability.
Employers using the operating cost method can potentially reduce the taxable value of the car fringe benefit if the vehicle is driven primarily for business purposes.

📌 What You Need to Do:
Ensure you have odometer records for all vehicles as of 31 March 2025 and maintain accurate logbooks if you are claiming business use exemptions.

2. Entertainment Expenses

Providing employees with meals, drinks, recreation, or travel can trigger FBT obligations. The ATO closely monitors how entertainment benefits are classified, as these expenses also impact income tax and GST deductions.

📌 What You Need to Do:
If your business has hosted events, funded employee travel, or covered meal expenses, review these expenses to determine whether FBT applies.

3. Living Away from Home Allowances (LAFAs)

Determining whether an employee is travelling for work or living away from home is critical, as they are treated differently under FBT rules.

Travelling employees may claim tax deductions for work-related expenses.
LAFH employees may qualify for FBT concessions, but strict eligibility requirements apply.

📌 What You Need to Do:
Ensure LAFH allowances are correctly classified and meet the ATO’s requirements to avoid unexpected tax obligations.

What’s Exempt from FBT?

Certain work-related benefits are FBT-exempt, provided they are primarily used for employment purposes. These include:

✔ Portable electronic devices (e.g. laptop, tablet, mobile, PDA, electronic diary, notebook computer, GPS navigation device) that are provided primarily for use in the employee’s employment (a Small Business Entity employee can have more than one portable electronic device in the same FBT year, all other businesses are limited to one device for each employee per FBT year);
✔ Work-related software
✔ Protective clothing required for the job
✔ Briefcases and calculators
✔ Tools of trade

For small businesses, employees can receive multiple electronic devices tax-free per year. Other businesses are limited to one device per employee per year.

How to Prepare for the 31 March 2025 Deadline

Action Items for Business Owners

📌 Review Employee Benefits
Assess whether any FBT liabilities apply based on the key questions above.

📌 Complete Your Motor Vehicle Declaration
If your business owns or leases vehicles, you must complete a declaration with odometer readings as of 31 March 2025 and if applicable, operating costs and business usage details.

📌 Submit Required Documents
If you have purchased a new vehicle in the past year, submit the purchase contract and odometer reading to Strategem.

📌 Ensure Entertainment & Accommodation Benefits Are Recorded Correctly
Keep detailed records of any entertainment expenses, travel reimbursements, or accommodation benefits provided to employees.

📌 Lodge Your FBT Return on Time
If you have an FBT liability, your FBT return is due by 21 May 2025.

Vehicle Specific Insights:

If you have maintained a logbook during the 2024 FBT year and have not previously provided a copy to Strategem, please contact us to discuss your FBT options for assessing car fringe benefits for employees.

If a home-garaged car is not being driven
Where a car has not been driven at all during the period it has been garaged at home or has only been driven briefly for the purpose of maintaining the car, the ATO will accept that you do not hold the car for the purpose of providing fringe benefits to your employee.
In these situations, there will be a nil taxable value for the car and no FBT liability. Odometer records will be required to show that, during the period the car is garaged, it has not been driven, or has only been driven briefly for the purposes of maintaining the car.
If a home-garaged car is being driven
If an employee is driving a car for business purposes, and you elect to use the operating cost method, you may be able to reduce the taxable value of the car fringe benefit to take into account this business use. This may include reducing the taxable value to nil if the car is only being used for business travel.

What you need to do:

Your Motor Vehicle Declaration has been attached.

In order to assess your Fringe Benefit liability, can you please:

☐ Review your current employee arrangements to determine if any Fringe Benefits are provided;
☐ Complete the uploaded Motor Vehicle Declaration;
☐ Purchased a new vehicle? Please advise the vehicle’s odometer reading as at 31 March 2025 and forward a copy of the purchase contract to us;
☐ Sign the Motor Vehicle Declaration/s, Statement by Employee and Statement by Employer where indicated; and
☐ Return the signed documents to our office by 30 April 2025.

Please remember the odometer reading of each motor vehicle is required as at 31 March 2025, so add this task to your diary now.

Need Help? Let’s Get Your FBT Sorted

FBT can be a complex and costly tax if not managed correctly. At Strategem Financial Services, we help businesses identify, minimise, and manage their FBT obligations, ensuring compliance while maximising tax efficiency.

Not sure if you have an FBT liability?
Need assistance with reporting or record-keeping?
Want to explore strategies to reduce your FBT liability?

We are here to help

If you need further advice, please do not hesitate to contact our office on (03) 5445 4777 and one of our Accountants & Advisors are available to support you.

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