Fringe Benefits Tax (FBT) Australia: What Employees Need to Know
Fringe benefits tax is paid by employers, but it affects your take-home pay, HECS debt and government benefits. Here's what Australian employees need to kn
publishedAt: "2026-06-07" updatedAt: "2026-06-07" author: "Dolaro Editorial" readTime: 14
Fringe Benefits Tax (FBT) Australia: What Employees Need to Know
Your employer gets a company car or pays your gym membership — great. But there is a tax implication attached to almost every non-cash perk you receive through work, and it can affect far more than most employees realise. Fringe benefits tax (FBT) is paid by your employer, not you. But the downstream effects — on your HECS repayment, your Medicare Levy Surcharge exposure, your Family Tax Benefit eligibility, and your ability to salary sacrifice effectively — land squarely on you.
For the FBT year ending 31 March 2026, the FBT rate is 47%, matching the top marginal income tax rate plus the Medicare Levy. Employers who get this wrong face significant penalties. Employees who do not understand it end up surprised at tax time when their adjusted taxable income is higher than expected. This article explains how fringe benefits tax works in Australia from an employee's perspective: what it is, which benefits are affected, how it changes your effective income, what is exempt, and how the system works for different types of workers and employers.
What Is Fringe Benefits Tax and Who Pays It?
Fringe benefits tax is a tax on non-cash benefits provided by an employer to an employee, or to an associate of an employee such as a family member, in connection with their employment. It is governed by the Fringe Benefits Tax Assessment Act 1986 and administered by the ATO.
The critical point for employees to understand is that FBT is a tax paid by the employer, not the employee. You do not pay FBT on benefits you receive. Instead, your employer calculates the taxable value of the benefits they provide to you, grosses that value up to reflect a pre-tax equivalent, and pays 47% of that grossed-up amount to the ATO.
However, FBT does not disappear from your world entirely. The reason it matters to you is the Reportable Fringe Benefits Amount (RFBA), which appears on your income statement (formerly called the payment summary) and is included in income tests across a range of government programs and obligations. More on that below.
The FBT year runs from 1 April to 31 March — not the standard financial year. So when you hear "the 2025-26 FBT year," that refers to the year ending 31 March 2026. Employers must lodge their FBT return and pay any liability by 21 May following the end of the FBT year (or 26 June if using a registered tax agent).
The FBT Rate and How the Gross-Up Works
For the FBT years running from 31 March 2023 through to 31 March 2027, the FBT rate is 47%, according to the ATO. This rate is deliberately set to match the top marginal income tax rate plus the 2% Medicare Levy, so that providing a benefit in kind is broadly no cheaper for an employer than paying equivalent cash wages.
To calculate FBT, the employer does not simply apply 47% to the face value of the benefit. Instead, the benefit is "grossed up" — inflated to represent the pre-tax equivalent — and then 47% is applied to that grossed-up amount. This prevents employers from structuring around the tax by providing cheap goods.
There are two gross-up rates, depending on whether the employer can claim a GST input tax credit on the benefit:
| Gross-Up Type | When It Applies | Gross-Up Rate (2025-26) |
|---|---|---|
| Type 1 | Employer can claim GST credit on the benefit | 2.0802 |
| Type 2 | Employer cannot claim GST credit on the benefit | 1.8868 |
Worked example — how FBT is calculated on a benefit:
Suppose your employer pays for a gym membership worth $1,200 per year (GST-inclusive). The employer can claim the GST credit, so this is a Type 1 benefit.
Grossed-up value: $1,200 x 2.0802 = $2,496.24 FBT payable: $2,496.24 x 47% = $1,173.23
Your employer pays $1,173.23 in FBT to the ATO for providing you with a $1,200 gym membership. That is a significant cost, which is why many employers factor the FBT cost into their decision-making around non-cash benefits.
What Counts as a Fringe Benefit?
The ATO casts a wide net over what qualifies as a fringe benefit. Common categories include:
Car fringe benefits: A car provided by an employer for private use, including personal use of a company car. The taxable value is calculated using either the statutory formula method (based on the car's base value and a flat 20% statutory fraction) or the operating cost method (based on actual running costs, reduced by the percentage of business use evidenced by a logbook).
Car parking: If your employer provides or pays for a car park within 1 kilometre of a commercial car park and the lowest representative daily fee at that commercial car park exceeds $11.03 (the 2026 FBT year threshold, up from $10.77 in 2025), a taxable car parking fringe benefit arises. This catches many city-based workers.
Expense payment benefits: Where your employer reimburses a personal expense or pays a bill on your behalf — for example, paying your electricity bill, school fees, or private health insurance premium.
Loan fringe benefits: If your employer lends you money at a rate below the ATO's benchmark interest rate (which is updated annually), the difference in interest is treated as a fringe benefit.
Housing and accommodation benefits: Employer-provided housing or rent assistance, including Living Away From Home Allowances (LAFHA) in certain circumstances.
Property benefits: Goods or property provided at no cost or at a discount, such as discounted company products.
Entertainment benefits: Meals, functions, and entertainment paid for by an employer, though the valuation rules here are complex and depend on whether entertainment is salary packaged or not.
The Reportable Fringe Benefits Amount and Why It Affects You
This is where FBT becomes directly relevant to your tax return, even though you do not pay FBT yourself.
If the total taxable value of certain fringe benefits your employer provides to you in an FBT year exceeds $2,000, your employer must report those benefits to the ATO. The amount they report is the grossed-up value — calculated at the Type 2 rate — and it appears on your income statement as the Reportable Fringe Benefits Amount (RFBA).
For the FBT year ending 31 March 2026: if the taxable value of your benefits exceeds $2,000, the minimum RFBA reported is $3,773 ($2,000 x 1.8868).
The RFBA does not increase the income tax you pay on your wages. Your employer has already paid FBT on those benefits. But the RFBA is added to your taxable income to produce your "adjusted taxable income" (ATI), and the ATO uses your ATI across multiple income tests. This can affect:
HECS-HELP repayments: Your compulsory repayment income includes your RFBA. A higher repayment income pushes you into a higher repayment rate bracket, meaning a larger portion of your income goes to student debt repayment each year.
Medicare Levy Surcharge: If your ATI (including RFBA) pushes you above the surcharge threshold ($93,000 for singles in 2025-26), and you do not have adequate private hospital cover, you may become liable for the surcharge of 1% to 1.5% of your income.
Family Tax Benefit and Child Care Subsidy: Both use ATI in the means test. A higher RFBA can reduce your entitlement or cut you out entirely.
Private health insurance rebate: The rebate tiers are income-tested. RFBA can shift you into a lower rebate tier.
Child support assessments: Services Australia includes RFBA when calculating child support obligations.
Worked example — RFBA effect on HECS:
Suppose you earn $85,000 and have a novated lease on a company car, resulting in an RFBA of $15,000 on your income statement. Your repayment income for HECS purposes is $85,000 + $15,000 = $100,000. At $100,000, the compulsory repayment rate is higher than at $85,000, meaning you repay more of your student loan each year — even though your take-home salary has not increased.
Benefits That Are Exempt from FBT
Not every perk triggers an FBT liability. A range of benefits are exempt, meaning your employer pays no FBT and nothing appears on your RFBA for those items. Exempt benefits also do not count toward your $2,000 reporting threshold.
The key exempt categories, according to the ATO, include:
Work-related items: This is one of the most practical exemptions for employees. Portable electronic devices primarily used for work (one device per type per year — so one laptop and one smartphone are fine), tools of trade, briefcases and protective clothing are all exempt. The device must be primarily for work use.
Minor benefits: Benefits with a taxable value of less than $300 per item, provided infrequently and irregularly, are generally exempt. This covers things like a bottle of wine for a work anniversary, a coffee, or a one-off voucher. This exemption cannot be used to circumvent the rules by splitting larger benefits into smaller ones.
Electric vehicles: Battery electric vehicles (BEVs) and hydrogen fuel cell vehicles are exempt from FBT if first provided or made available after 1 July 2022 and the vehicle's value at first sale is below the luxury car tax threshold for fuel-efficient vehicles ($91,387 for 2025-26). Note that plug-in hybrid electric vehicles lost this exemption from 1 April 2025, unless they were under a pre-existing financially binding commitment prior to that date.
Salary sacrificed superannuation: Contributions made to your super fund under a salary sacrifice arrangement are not fringe benefits. They are concessional contributions taxed at 15% within the fund and have no effect on your RFBA.
Exempt meal entertainment thresholds: Certain meal and entertainment benefits provided on an employer's business premises are exempt, as are some minor entertainment items under the minor benefits rule.
FBT Concessions for NFP and Charity Employees
If you work for a not-for-profit (NFP) organisation, public hospital, ambulance service, or public benevolent institution (PBI), the FBT rules work differently — and significantly to your advantage.
FBT-exempt organisations, confirmed by the ATO, can provide fringe benefits to each employee up to the following grossed-up capping thresholds per FBT year, exempt from FBT:
| Organisation Type | Grossed-Up Capping Threshold |
|---|---|
| Public benevolent institutions and health promotion charities | $30,000 per employee |
| Public and not-for-profit hospitals; ambulance services | $17,000 per employee |
This means an employee of a PBI — for example, a charity or a religious welfare organisation — can salary package up to $15,900 in general living expenses per FBT year (rent, mortgage, groceries, utilities) using pre-tax salary, pay no FBT on those amounts, and still have access to a separate $2,650 per year in salary-packaged meal entertainment.
This is a genuine and significant benefit. A nurse at a public hospital salary packaging $17,000 worth of general living expenses in a year reduces their taxable income by that amount, which at a 34.5% marginal rate (including Medicare Levy) is a tax saving of roughly $5,865 per year.
Crucially, for most FBT-exempt and FBT-rebatable employers, these packaged amounts do appear as a reportable fringe benefit on your income statement — meaning the RFBA effects on HECS, Medicare Levy Surcharge and other income tests still apply, even though no FBT is paid by your employer.
Novated Leases and the Electric Vehicle Exemption
A novated lease is a three-way arrangement between you, your employer, and a finance company. You salary sacrifice lease payments for a car — and typically running costs like fuel, registration, and insurance — out of your pre-tax income. The employer makes the payments from your salary before tax is calculated, reducing your taxable income.
For a standard petrol or diesel vehicle, the car is a fringe benefit. The employer must calculate FBT using either the statutory formula or operating cost method, and the employee typically makes post-tax contributions to offset the FBT liability.
For eligible electric vehicles, the FBT exemption changes this equation dramatically. Where a BEV or hydrogen fuel cell vehicle meets the eligibility criteria (first made available after 1 July 2022, value at first sale below $91,387), no FBT applies. This means the employee sacrifices the full lease cost from pre-tax income with no post-tax contribution required.
Worked example — EV novated lease saving:
Suppose you earn $100,000 and salary sacrifice a $60,000 BEV on a three-year novated lease. Annual lease and running costs total $18,000. Under the FBT exemption:
Your taxable income reduces from $100,000 to $82,000. At a 34.5% marginal rate, the income tax saving is approximately $6,210 per year. No FBT applies. No post-tax contribution is required.
An equivalent petrol vehicle would generate an FBT liability — typically passed back via a required employee contribution from after-tax income — eliminating much of this saving.
The important caveat: even though the employer pays no FBT on an exempt EV, the notional value of the EV benefit still appears on your income statement as an RFBA. This can push up your adjusted taxable income for HECS repayment, Medicare Levy Surcharge, and income-tested benefits — even though you pay no extra income tax.
How FBT Interacts with Salary Sacrifice
Salary sacrifice is an arrangement where you agree to forgo part of your cash salary in exchange for your employer providing benefits of equivalent value. The tax advantage is that the forgone salary is not included in your assessable income, reducing the income tax and Medicare Levy you pay.
Whether salary sacrifice creates an FBT liability depends entirely on what is being sacrificed for:
Benefits with no FBT and no RFBA: Super contributions. Sacrificing salary into super reduces your taxable income and creates no RFBA, making it the cleanest salary sacrifice strategy.
Benefits with no FBT but with an RFBA: Work-related portable electronic devices, where one per type per year qualifies. A laptop or phone under the work-related items exemption.
Benefits with FBT but often structured to minimise it: Novated lease vehicles for petrol or diesel cars, where the FBT liability is managed using employee after-tax contributions (the Employee Contribution Method).
Benefits that are FBT-exempt for eligible employers: All the NFP salary packaging options listed above.
The key rule to understand: you must enter a salary sacrifice arrangement before you become entitled to the salary. You cannot retrospectively agree to sacrifice a payment you have already earned — the ATO will treat that as a sham arrangement.
FBT Key Dates and What Employees Should Check
The FBT year ends on 31 March each year. What follows matters to you as an employee:
After 31 March, your employer calculates the total fringe benefits they provided to you during the year. If the taxable value exceeded $2,000, they report the grossed-up RFBA to the ATO via Single Touch Payroll. This amount appears on your income statement, which you can access through myGov linked to the ATO.
When you lodge your tax return (for the income year ending 30 June, not the FBT year), you are required to report your RFBA under the "Income tests" section of your return. You do not pay income tax on it — but you must report it so the ATO can run the correct income tests for HECS, Medicare, and government payments.
What to check before lodging your return:
Your income statement in myGov should show your total RFBA for the year. Verify it matches your expectation based on benefits you received. If there is an error, raise it with your employer or payroll department before lodging. Once lodged, an amendment is possible but adds administrative effort.
If you are close to a threshold that matters to you — the HECS repayment income threshold, the Medicare Levy Surcharge threshold at $93,000, or a Family Tax Benefit income cutoff — calculate your adjusted taxable income including the RFBA before lodging. You may want to adjust voluntary HECS repayments or other arrangements accordingly.
FAQ
What is fringe benefits tax in Australia?
Fringe benefits tax (FBT) is a tax employers pay on non-cash benefits they provide to employees. The FBT rate is 47% and applies to the grossed-up value of the benefit. Examples include company cars, car parking, expense reimbursements, entertainment, and loans at below-market rates. FBT is governed by the Fringe Benefits Tax Assessment Act 1986 and administered by the ATO.
Does the employee pay fringe benefits tax?
No. FBT is paid by the employer, not the employee. However, the grossed-up value of certain fringe benefits is reported on your income statement as a Reportable Fringe Benefits Amount (RFBA), which is included in income tests for HECS repayments, the Medicare Levy Surcharge, Family Tax Benefit, and other government payments.
What is a reportable fringe benefits amount (RFBA)?
The RFBA is the grossed-up value of fringe benefits your employer provides to you in an FBT year, where the total taxable value exceeds $2,000. Your employer reports the RFBA to the ATO and it appears on your income statement. For an FBT year with benefits above the $2,000 threshold, the minimum RFBA reported is $3,773. You do not pay income tax on it, but it increases your adjusted taxable income for various government income tests.
How does fringe benefits tax affect my HECS repayment?
Your compulsory HECS-HELP repayment is calculated on your "repayment income," which includes your taxable income plus your RFBA. If your employer provides reportable fringe benefits — for example, through a novated lease — the RFBA can push your repayment income into a higher repayment rate bracket, increasing the amount deducted from your pay toward your student debt even if your cash salary has not changed.
What benefits are exempt from fringe benefits tax?
Key FBT-exempt benefits include: work-related portable electronic devices (one per type per year, primarily for work), tools of trade, minor benefits under $300 provided infrequently, salary sacrificed superannuation contributions, and eligible electric vehicles (battery electric vehicles first used after 1 July 2022, below the $91,387 luxury car tax threshold for 2025-26). Plug-in hybrid vehicles lost the FBT exemption from 1 April 2025.
Is the FBT rate changing in 2026?
No. The FBT rate remains at 47% for FBT years ending 31 March 2023 through to 31 March 2027, according to the ATO. The car parking threshold increased to $11.03 for the 2026 FBT year, up from $10.77 in the 2025 FBT year.
How does a novated lease work with fringe benefits tax?
A novated lease lets you salary sacrifice car payments from pre-tax income. For petrol or diesel vehicles, the car creates an FBT liability; employees typically make post-tax contributions (the Employee Contribution Method) to offset this. For eligible electric vehicles under $91,387, the FBT exemption eliminates the tax liability entirely — but the notional value of the benefit still appears as an RFBA on your income statement, which affects income tests for HECS and Medicare Levy Surcharge.
Do NFP and charity employees get FBT concessions?
Yes. Employees of public benevolent institutions (such as charities registered with the ACNC and endorsed by the ATO) can receive up to $30,000 per year in grossed-up fringe benefits exempt from FBT — equivalent to roughly $15,900 in salary-packaged living expenses. Employees of public hospitals and ambulance services can receive up to $17,000 grossed-up. These amounts still generate an RFBA on your income statement, affecting income-tested obligations.
When does the FBT year run and when must employers lodge?
The FBT year runs from 1 April to 31 March. Employers must lodge their FBT return and pay any liability by 21 May following the end of the FBT year — so 21 May 2026 for the year ending 31 March 2026. Employers using a registered tax agent may receive an extended deadline of 26 June 2026. Employers with an FBT liability of $3,000 or more in the prior year must pay quarterly instalments.
What is the minor benefits FBT exemption?
Benefits with a taxable value of less than $300 per item, provided infrequently and irregularly, are generally exempt from FBT. Common examples include a small gift, a meal at a one-off event, or an occasional voucher. The exemption cannot be used by splitting a larger regular benefit into multiple sub-$300 amounts — the ATO looks at the nature and frequency of the benefit, not just the value.
How do I find my RFBA on my income statement?
Log into your myGov account and link it to the ATO. Navigate to "Employment" under the ATO portal. Your income statement from your employer will show your RFBA if your employer has reported it. If your employer uses Single Touch Payroll, this should be visible shortly after the FBT year ends. At tax time, the RFBA pre-fills in the "Income tests" section of your return, though you should always verify it is correct before lodging.
Final Word
Fringe benefits tax sits with your employer on the tax return, but its effects reach directly into your financial life as an employee. The RFBA can push up your repayment income for HECS, affect your Medicare Levy Surcharge position, and change what government payments you qualify for. Understanding which benefits your employer provides, what value is reported on your income statement, and how that affects your adjusted taxable income is worth the time — especially if you are close to a threshold that matters.
If you are salary sacrificing or considering a novated lease, the income tax saving is real, but always check the RFBA impact on your specific situation before committing. To understand how your income — including any RFBA — affects your overall tax position, use the Dolaro Income Tax Calculator.
This article is general information only and does not constitute financial, legal or tax advice. Always verify current rates and thresholds with the relevant government authority and seek advice from a qualified professional before making financial decisions.