Fringe Benefits Tax (FBT) 2025: Key Updates and How To Prepare

The Fringe Benefits Tax (FBT) year-end is fast approaching and now is the time for businesses to review their obligations. Many business owners unknowingly provide fringe benefits without realising they may be liable for FBT. Failing to meet FBT requirements can lead to penalties and unnecessary tax payments.

This guide breaks down what FBT is, who needs to lodge a return, key exemptions, recent changes and how to prepare before the deadline. Don’t wait until the last moment, now is the time to get organised and ensure compliance.

What is Fringe Benefits Tax (FBT)?

FBT is a tax employers pay on non-cash benefits provided to employees (or their associates, like family members) in addition to their salary or wages. The FBT year runs from 1 April to 31 March, and businesses must lodge their FBT return and pay by 21 May if lodging directly with the ATO.

For businesses using a registered tax agent, the due date may be extended to 25 June if lodging electronically. However, it’s essential to engage with an accountant early to ensure records are complete and all obligations are met on time.

Common taxable benefits include:

• Company cars used for personal purposes
• Meal and entertainment expenses (tickets, events, corporate hospitality)
• Gym memberships, lifestyle perks or gifts
• Loans or reimbursements provided to employees
• Housing and rent assistance

If your business provides any of these, you may be liable for FBT.

Who Needs to Lodge an FBT Return?

Even if no FBT is payable, businesses should still lodge a nil return to avoid potential audits or compliance issues. Many businesses mistakenly assume they don’t need to submit an FBT return but lodging one confirms compliance and prevents the ATO from questioning whether benefits were overlooked.

Recent Changes & Considerations for 2025

1. Electric Vehicles & FBT Exemptions

The FBT exemption for eligible electric vehicles (EVs) remains a major tax-saving opportunity. Employers can provide eligible EVs to employees without incurring FBT, provided the:

• Car is zero- or low-emission (battery electric, hydrogen fuel cell or plug-in hybrid electric).
• First retail sale was after 1 July 2022.
• Car is below the luxury car tax (LCT) threshold ($89,332 for fuel-efficient vehicles in 2024-25).

However, from 1 April 2025, plug-in hybrid electric vehicles (PHEVs) will no longer qualify for the FBT exemption. Businesses that already have a financially binding commitment in place before this date—such as a purchase or lease agreement—will still be able to apply for the exemption, provided there are no changes to the arrangement. Any new commitments or modifications to existing leases after 1 April 2025 will result in the loss of the exemption, making the vehicle subject to FBT.

Employers considering PHEVs as part of their salary packaging options should review their agreements now to ensure they meet the exemption conditions before the deadline. Fully electric and hydrogen fuel cell vehicles will continue to qualify for the FBT exemption beyond 2025.

2. Proposed $20,000 Entertainment Deduction

A new proposal by the Liberal Party (Opposition) suggests a $20,000 tax deduction for business-related entertainment expenses, which would be exempt from FBT. If passed, this could offer significant tax savings for small businesses while cutting compliance burdens. Read more from The Guardian here.

However, this proposal is not yet law and will only proceed if the Liberal Party wins the next federal election. Even if they do, it will still need to go through the full legislative process before becoming law. Additionally, there are complexities in how it interacts with existing tax laws like GST and FBT. Until official legislation is introduced, entertainment expenses provided to employees may still trigger FBT obligations. Businesses should continue tracking who receives entertainment benefits (employees vs. clients) to avoid unexpected tax liabilities.

Common FBT Mistakes & How to Avoid Them

1. Not tracking entertainment expenses properly: Meals, tickets, and client events may still be subject to FBT unless explicitly exempt.
2. Incorrectly claiming work-related exemptions: Some items (e.g., laptops) are only FBT-exempt if mainly used for work.
3. Forgetting FBT applies to directors: If directors receive non-cash perks, the company may still owe FBT.
4. Not keeping records: The ATO requires businesses to keep detailed records of benefits provided, including logbooks for company cars.

Now is the time to review your records and ensure everything is properly documented.

How to Prepare for FBT Before the Deadline

1. Review all benefits provided to employees and directors – Identify any perks that could trigger FBT.
2. Check exemptions – Ensure any work-related benefits meet the criteria for tax-free treatment.
3. Keep detailed records – Track vehicle use, meal expenses, and all other benefits.
4. Use salary packaging effectively – Some benefits can be structured tax-effectively to reduce FBT liability.
5. Lodge an FBT return – Even if no FBT is payable, submitting a nil return confirms compliance.
6. Engage with your accountant early – With different lodgment deadlines depending on whether you use a tax agent, it’s best to prepare well in advance to avoid last-minute stress.
7. Seek professional advice – FBT is complex, and expert guidance can help businesses avoid overpaying taxes.

Stay Ahead of the FBT Deadline

With the FBT year-end approaching, businesses should review their obligations now to avoid last-minute surprises. The recent EV exemption and potential entertainment deduction changes make it more important than ever to track benefits carefully.

If you’re unsure about your FBT obligations or want to explore tax-saving opportunities, we can help. Get in touch today to ensure you’re compliant and minimise unnecessary tax payments.

Need help with FBT? Contact Carbon for expert advice before the deadline!