Fringe Benefits Tax (FBT) continues to be an area that is easy to overlook, as the rules capture a lot of transactions and the legislation is potentially complex to understand.
As a general rule of thumb, if your business is providing your employees with any non-cash benefits, or paying for any of their private expenses, you may be required to pay FBT.
With the FBT year ending 31 March, now is the time to review your position and ensure you have the right approach and documentation in place.
Here are examples of three types of fringe benefits that businesses may provide to their employees:
Motor Vehicles: Methods, Exemptions and Documentation
If your business provides vehicles to employees (including directors), there are two main ways to calculate the taxable fringe benefit:
- Statutory formula method – a simple, flat-rate of 20% applied to the vehicle’s base value
- Operating cost method – based on actual running costs and business use of the vehicle (the higher the business use, the lower the taxable value of the vehicle)
While the statutory method is simpler, the operating cost method can often produce a better result, but only if you have a valid logbook that substantiates a high business use percentage.
A couple of key updates and reminders:
- Electric vehicles may still be exempt from FBT (subject to eligibility), however plug-in hybrid vehicles are no longer exempt
- Logbooks must run for 12 consecutive weeks and reflect genuine, typical business usage. They are then valid for 5 years.
- Please be mindful that a valid reason for each business trip needs to be filled in. The ATO will not accept a narration that simply says ‘business’.
- For utes and panel vans to be exempt, private use must be limited (generally under 1,000kms per year)
This is an area where we’re seeing increased ATO scrutiny, particularly around poor records and documentation.
Meal Entertainment: Choosing the Right Method
If your business pays for employee meals, this may be considered a Meal entertainment fringe benefit. This can be measured under three different methods:
- 50/50 method – splits total entertainment spend evenly between business and private use
- 12-week register method – uses a representative sample over 12 weeks
- Actual cost method – tracks the exact nature of each expense
Each method has trade-offs:
- The 50/50 method is simple and requires minimal record-keeping. However, you lose access to certain exemptions, including the minor and infrequent benefit exemption.
- The actual cost method requires more detailed records (receipts, attendees, purpose) but usually results in a lower FBT outcome, as you can rely on more exemptions.
The right choice depends on your business. This is something worth reviewing each year rather than defaulting to the same method.
Living Away From Home Allowances (LAFHAs)
If you pay your employees an allowance in order to relocate for work, this can trigger FBT depending on the circumstances.
You may be caught where:
- The arrangement lasts more than 21 consecutive days or more than 90 days in a year, but less than 12 months, and
- The employee is maintaining their usual home while living elsewhere for work
That said, there are potential exemptions:
- Payments for accommodation and food may be exempt (up to ATO benchmark rates), provided eligibility criteria are met
These arrangements can become complex quickly, particularly where documentation is incomplete or assumptions are made.
Why We’re Raising This Now
FBT is one of those areas that often gets attention late when options are limited.
The reality is that your outcome is largely determined by the records you keep throughout the year, not just at 31 March.
If you’re unsure whether your current approach is appropriate, or if your documentation would stand up to review, now is the time to address it.
Need to Review Your Position?
If any of the above applies to your business, we recommend a quick check-in before the FBT year wraps up.
A short review now can help avoid unnecessary tax, penalties, or ATO queries down the track.
Get in touch with our team to discuss your FBT position and ensure you’re set up correctly.
Download our 2026 FBT Checklist & Odometer Declaration