A separate tax on non-cash benefits, and why small businesses aren't exempt
You give an employee the use of a work vehicle. You cover their gym membership. You provide free car parking.
None of these are wages. All of them can still be taxed — just not through the normal income tax system.
The short answer
Fringe Benefits Tax (FBT) is a separate tax, paid by the employer, on non-cash benefits provided to employees (or their family) in connection with their employment — things like private use of a work vehicle, entertainment, or paying a personal expense on their behalf. It runs on its own annual cycle, from 1 April to 31 March, separate from the income tax year.
Why FBT exists as a separate tax
Without it, an employer could simply pay employees in non-cash perks instead of wages, and those perks would escape income tax entirely. FBT closes that gap — the employer pays tax on the value of the benefit, rather than the employee having it added to their taxable income.
Common benefits that can trigger FBT
| Benefit type | Example |
|---|---|
| Car benefits | An employee or director using a company car for private trips, including the regular commute |
| Entertainment | Providing entertainment to employees — covered in detail in its own guide |
| Car parking | Providing parking near a commercial parking station charging above the daily threshold, though small business exemptions can apply |
| Expense payments | Reimbursing or paying a personal expense on an employee's behalf |
| Loans | Providing an employee a loan at a lower interest rate than the ATO's benchmark rate |
| Property | Giving an employee goods, real estate or shares |
The “otherwise deductible” rule — a useful exception
If a benefit would have been fully tax-deductible to the employee had they paid for it themselves — a genuine work-related subscription, for example — it generally isn't treated as a fringe benefit at all. This is a meaningful exception worth understanding, since it means not every work-related benefit automatically falls into FBT.
The minor benefits exemption
Small, infrequent benefits — generally under $300 and unreasonable to treat formally as a fringe benefit — can be exempt. An occasional small gift or a one-off team lunch may fall within this. A regular, predictable pattern of the same benefit generally won't, even if each individual instance is under the threshold.
What happens if FBT applies
You need to register for FBT separately from your income tax registration, generally through your ABN.
An FBT return is lodged for each year in which you have a liability, due 21 May, with tax agent lodgement sometimes attracting an extended deadline.
If your FBT liability exceeds a set threshold, quarterly instalments are generally paid through your BAS during the year, based on your prior year's liability.
The FBT itself is calculated on a “grossed-up” value of the benefit, reflecting the fact that it's provided instead of, effectively, taxed cash — which is a specific calculation worth having done properly rather than estimated.
Why small businesses often assume FBT doesn't apply to them — and are sometimes wrong
FBT isn't limited to large employers. Any business providing a company car for private use, covering a personal expense, or offering certain other perks to staff — including directors, who are often employees of their own company for this purpose — can trigger FBT obligations, regardless of business size. This is one of the more commonly missed obligations among small companies specifically.
A quick self-check
Do any employees, including me as a director, have private use of a company-owned vehicle?
Do I provide car parking, entertainment, or cover personal expenses for staff?
Have I ever registered for FBT, and do I know whether I currently need to?
Am I confident the “minor benefits” items I provide genuinely qualify for the exemption?
When should you get professional help?
you're not sure whether a benefit you're already providing has created an FBT obligation;
you're a company director considering a company car and want the FBT implications modelled first;
you want to register for FBT correctly and understand your ongoing lodgement obligations; or
you want your employee benefits reviewed to identify anything you may have missed.
Continue learning
→ Meals, Coffee, Entertainment and Client Functions — What Can My Business Actually Claim?
→ Should I Buy a Vehicle Through My Business or Personally?
→ Company Money vs My Money — Why Does the Difference Matter?
SKC Accounting | Knowledge Centre | Knowledge Guide 063
Last reviewed: August 2026
General information only. This guide does not take into account your individual circumstances and is not a substitute for professional accounting, taxation, legal or financial advice.