Fringe Benefits Tax 2026: What Every Australian Employer Needs to Know Before the Deadline
The 2026 Fringe Benefits Tax (FBT) year closed on 31 March 2026. If your business provides non-cash benefits to employees, the clock is now ticking on your FBT return. The ATO is sharpening its compliance focus. There are also big changes to electric vehicle rules. This is not the year to leave FBT to chance.
Whether you’re new to FBT or an experienced employer reviewing your duties, this guide covers what you need to know for the 2026 FBT year.
What Is Fringe Benefits Tax?
FBT is a tax paid by employers — not employees. It applies to non-cash perks given to workers or their family members. The ATO created FBT so that giving perks instead of salary doesn’t create an unfair tax advantage over regular wages.
Common Examples
Here are some typical fringe benefits:
- Company cars available for private use
- Employer-paid entertainment (meals, functions, events)
- Low-interest or interest-free loans
- Paying for private expenses (health insurance, school fees)
- Salary-packaged items
FBT is worked out separately from income tax (see our EOFY tax planning guide). It is based on the grossed-up taxable value of the benefits you provide.
2026 FBT Rates and Key Thresholds
For the FBT year ending 31 March 2026, these rates apply:
| Item | Rate / Amount |
|---|---|
| FBT Rate | 47% |
| Type 1 Gross-Up Rate (GST-creditable) | 2.0802 |
| Type 2 Gross-Up Rate (no GST credit) | 1.8868 |
| Reportable Fringe Benefits Threshold | $2,000 (grossed-up) |
| Minor Benefits Exemption | < $300 per occasion |
| Benchmark Interest Rate (loans) | 8.62% |
What Is the Reportable Fringe Benefits Amount?
If the total grossed-up value of benefits for a worker exceeds $2,000, you must report a Reportable Fringe Benefits Amount (RFBA) on their income statement. Workers don’t pay tax on this amount directly. However, it affects their access to government benefits, Medicare levy surcharge, and child support.
Common Fringe Benefits: What Triggers FBT?
Car Fringe Benefits
One of the most common — and most checked — fringe benefits is making a company car available for private use. Private use includes driving between home and work, personal trips, and any time the car is parked at the employee’s home.
You can choose between two methods to work out the taxable value:
- Statutory Formula Method: Taxable value = 20% of the car’s base value, adjusted for days available. It’s simple but can be costly for cars with low business use.
- Operating Cost (Logbook) Method: Taxable value is based on actual running costs multiplied by the private-use percentage. You need a valid 12-week logbook. This method often saves a lot for cars with high business use.
Entertainment Benefits
Providing meals, drinks, or fun activities to employees can trigger FBT. The rules depend on where the entertainment happens, who attends, and the cost per head. Note: entertainment for clients is generally not subject to FBT. However, it is also not income tax deductible.
Loan Fringe Benefits
If you lend money to an employee at a rate below the ATO’s benchmark rate (8.62% for 2026), the difference is a taxable fringe benefit.
Expense Payment Benefits
Paying or reimbursing an employee’s private costs — such as health insurance, home internet, or school fees — creates an expense payment fringe benefit.
Key FBT Exemptions to Know
Smart employers use exemptions to cut their FBT bill. Here are the main ones:
- Work-Related Items: One portable device per worker per year (laptop, tablet, or phone) is exempt. Tools of trade, protective clothing, and briefcases are also exempt.
- Minor Benefits: Benefits under $300 per occasion that are given rarely are generally exempt. This is not a yearly cap.
- Otherwise Deductible Rule: If the worker could have claimed a full tax deduction for the cost themselves (e.g., work subscriptions, training), the taxable value drops to nil.
- Electric Vehicles: A specific exemption applies to eligible zero and low-emission vehicles (see below).
Electric Vehicle FBT Exemption: Major Changes for 2026
The EV FBT exemption is one of the most talked-about provisions in Australian tax law. It changed significantly from 1 April 2025.
What’s Still Exempt
Battery electric vehicles (BEVs) and hydrogen fuel cell vehicles remain fully FBT-exempt if they meet certain conditions. They must have been first held and used on or after 1 July 2022. The purchase price must be below the luxury car tax limit for fuel-efficient vehicles ($91,387 for 2025–26). Running costs — including home charging — are also exempt.
Plug-In Hybrids Are No Longer Exempt
From 1 April 2025, plug-in hybrid electric vehicles (PHEVs) no longer qualify for the FBT exemption. Any PHEV arrangement entered into or changed after this date will attract full FBT.
Grandfathering rules may protect PHEVs where a binding commitment was in place before 1 April 2025. However, any major change to the arrangement (such as refinancing) will void this protection.
2026 FBT Lodgement Deadlines
| Lodgement Method | Deadline |
|---|---|
| Self-lodgement (paper or online) | 21 May 2026 |
| Via registered tax agent (electronic) | 25 June 2026 |
To get the extended deadline, your business must be on your tax agent’s client list by 21 May 2026. Also, if your FBT bill was $3,000 or more last year, you must pay quarterly FBT instalments through your BAS.
ATO Compliance Focus Areas for 2026
The ATO has flagged several priority areas for FBT this year. Employers should pay close attention:
- Motor Vehicles: The ATO checks state vehicle registry data to find employers with company cars who haven’t lodged FBT returns. Logbook validity and private use of dual-cab utes are under close watch.
- PHEVs: The ATO will check whether PHEVs are correctly subject to FBT from 1 April 2025. It will also check whether grandfathering claims are valid.
- Entertainment: The ATO matches income tax deductions for entertainment against FBT returns. It looks for businesses claiming deductions without paying the matching FBT.
- Non-Lodgement: Businesses with workers, registered vehicles, or salary packaging that have never lodged an FBT return are a top audit target.
- Worker Contributions: The ATO is reviewing how worker contributions are documented to reduce FBT bills.
Practical Tips to Reduce Your FBT Bill
- Use exempt benefits: Focus on work-related items, minor benefits, and eligible EVs.
- Apply the otherwise deductible rule: Set up benefits so they count as work-related deductions for the worker.
- Ask for worker contributions: Post-tax worker contributions reduce the taxable value dollar-for-dollar.
- Use the logbook method for cars: If workers use company cars mainly for business, a valid logbook can cut your FBT bill a lot.
- Do a yearly FBT review: Check all benefits given before 31 March each year. Find liabilities, apply exemptions, and make sure all required forms are signed.
- Use a registered tax agent: With the extended deadline of 25 June 2026, working with a professional gives you more time and expert help.
Sources
- ATO – Fringe Benefits Tax
- ATO – FBT Rates and Thresholds 2026
- ATO – Electric Cars FBT Exemption
- ATO – Lodging Your FBT Return and Paying
- Wolters Kluwer – 2026 Annual FBT Compliance Update with the ATO
- Moore Australia – FBT Year End 2026: ATO Compliance Focus Areas
Ready to Lodge Your FBT Return?
FBT compliance can be complex. Getting it wrong can lead to penalties, interest charges, and ATO audits. The team at TaxServe Australia helps businesses handle their FBT duties with confidence.
Need help working out your FBT liability? Want to review your salary packaging or lodge your 2026 FBT return? We’re here to help.
Contact TaxServe Australia today for expert FBT advice. We’ll make sure your return is lodged correctly and on time.