31 March 2025 marked the end of the 2025 Fringe Benefits Tax (FBT) year.

To keep up with evolving rules and avoid surprises, you may also want to stay across key FBT developments throughout the year, especially as ATO enforcement and guidance continue to shift.

The FBT regime imposes a tax on employers who provide non-cash benefits (either directly or through third parties) to their employees or associates. Employers bear the FBT liability even though their employees receive the benefits.

FBT can potentially apply to all employers, including tax exempt bodies and charities depending on the type of benefit and how it is provided.

In order to manage your organisation’s FBT obligations appropriately, and make sure that the correct amount of FBT is paid, it is important to:

1. Recognise where benefits are being provided to employees;
2. Have all relevant documentation available to be able to identify and value the types of benefits provided; and
3. Be aware of the various exemptions and concessions that may be available to reduce the taxable value of certain benefits provided and therefore the overall FBT cost payable by your business.

The conclusion of the 2024/25 FBT year at 31 March is an opportune time to ensure that you are managing your FBT obligations appropriately and, where possible, legitimately reducing your FBT liability cost.

Want to review last year’s benchmarks for comparison? See our overview of the Fringe Benefits Tax Year Ended 31 March 2024 to track changes across years.

Key Sections

Section One: In Summary

FBT rates have not changed for the year ended 31 March 2025.

The FBT rate for 2024/2025 remains at 47%, which is aligned to the highest individual marginal income tax rate of 45% plus Medicare Levy of 2%. 

In addition, the FBT gross-up rates, applicable for both GST and GST free benefits, also remain the same.

FBT law and policy updates:

Section Two: Rates & Thresholds

1.     FBT rates and thresholds

What is FBT?

The FBT regime imposes a tax on employers who provide non-cash benefits (either directly or through third parties) to their employees or their associates in respect of their employment. Employers bear the FBT liability even though their employees receive these non-cash benefits.

What is a benefit?

A benefit is defined broadly to include any right, privilege, service or facility. A fringe benefit is further defined to be a benefit which is provided to an employee (or their associate) in respect of their employment. There are certain specific carve outs to this definition (e.g. salary or superannuation guarantee in ordinary circumstance where that item is dealt with by other tax laws).

Types of common fringe benefits

• Company provided vehicles used for personal purposes
• Novated lease vehicles
• Car parking benefits
• Meal and entertainment expenses (tickets, events, corporate hospitality)
• Gym memberships, lifestyle perks or gifts
• Loans or reimbursements provided to employees
• Living away from home allowances
• Housing and rent assistance
• Discounted goods and services of your business

The following rates and thresholds apply for the FBT year 1 April 2024 to 31 March 2025:

FBT rate	47% (no change)
Type 1 gross-up rate	2.0802 (no change)
Type 2 gross-up rate	1.8868 (no change)
Gross-up rate for Reportable Fringe Benefits Amount (RFBA) purposes	1.8868 (no change)
Car parking threshold	$10.77 (up from $10.40)
Motor vehicle (other than cars) cents per kilometre rates	0-2,500cc – 66c (up from 62c) Over 2,500cc – 77c (up from 73c) Motorcycles – 19c (up from 18c)
Electric Vehicle home charging rate	4.2 cents per kilometre
Statutory benchmark interest rate	8.77% (up from 7.77% per annum)
Capping of concessional FBT treatment for certain employers	Public benevolent institutions and health promotion charities – FBT exemption capped at $30,000 (no change)   Public hospitals, non-profit hospitals and public ambulance services – FBT exemption capped at $17,000 (no change)   Rebatable employers (certain registered charities, non-government and non-profit organisations) – FBT rebate capped at $30,000 (no change)   Note: The above caps do not include the separate $5,000 cap for salary packaged meal entertainment and entertainment facility leasing expenses that has been applied since 1 April 2016.
Reasonable food and drink amounts for employees living away from home in Australia	One adult – $331 per week (up from $316) Two adults – $497 per week (up from $474)

Section Three: FBT 2025 in detail

1. Changes to consider for FBT in 2025

a) FBT exemption of electric vehicles

Background of the FBT exemption

Section 8(A) of the Treasury Laws Amendment (Electric Car Discount) Act 2022 outlines the requirements for a car benefit to qualify for the FBT exemption for electric vehicles.

To qualify for the FBT exemption, the following requirements must be satisfied:

1.  The car is a ‘zero or low emissions vehicle’ which comprises the following:
2. a battery electric vehicle
3. a hydrogen fuel cell electric vehicle, or
4. a plug-in hybrid electric vehicle.
5. The first instance when a person both held and used the car was on or after 1 July 2022.

• The car benefit was provided on or after 1 July 2022.

• The car is provided in respect of the employment of a current employee.

• No amount of luxury car tax (within the meaning of A New Tax System (Luxury Car Tax) Act 1999) has become payable on a supply or importation of the car before the benefit is provided.

This means that the first retail sale of the car must have been below the applicable luxury car tax threshold for fuel-efficient cars. The luxury car tax threshold for fuel-efficient cars is $89,332 for the 2024 year (and it was $84,916 for the 2023 year). If luxury car tax is payable on the car benefit, the benefit will not be eligible for the FBT exemption.

PHEV eligibility for FBT exemption

From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under fringe benefits tax (FBT) law and isn’t eligible for the electric cars exemption. However, you can continue to apply the electric car exemption where you meet the requirements below.

When a PHEV will continue to be exempt

You can continue to apply the electric car exemption if you meet the following requirements:

1. Use of the plug-in hybrid electric vehicle was exempt before 1 April 2025; and
2. There is a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025 (but any optional extension of the agreement is not considered binding).

When a PHEV is no longer exempt If there is a change to a pre-existing commitment on or after 1 April 2025, the FBT exemption for the plug-in hybrid electric vehicle will no longer apply from the date of that new commitment

What a commitment is

You have entered into a commitment at the point there is an obligation to undertake a transaction and it cannot be backed out of. The commitment must:

1. be financially binding on one or more of the parties
2. relate to the private use, or availability for private use, of the car to an employee or associate.

An example of entering a commitment is where an employer commits to the purchase or lease of a car, including a novated lease arrangement.

Reportable fringe benefits amount (RFBA) reporting requirements

A reminder that an employer is required to include the grossed-up value of an FBT-exempt electric car and associated expenses in the employee’s income statement as a reportable fringe benefits amount (RFBA) where the total fringe benefit provided to an employee exceeds A$ 2,000.

For electric cars provided to employees, employers are required to calculate the notional taxable value of the FBT-exempt electric car as though the relevant exemption did not apply. This is to report the amount in the employee’s income statement. This can be done using either:

• The statutory formula method, or
• The operating cost method

An employer who has used the shortcut method for calculating the electricity costs an employee has incurred in charging the car at their home can also use the same method to calculate the RFBA for the employee

b) Update for car parking fringe benefits

A car parking benefit may arise when an employer provides an employee with a car parking space. The parking space provided to the employee is considered to be a car parking benefit where a commercial car parking station is situated within a one-kilometre radius and the lowest all-day rate at the facility exceeds the daily car parking threshold $10.77.

The ATO released its most guidance in 2023 with the updated TR 2021/2 which outlined the Commissioner’s view on the types of car parks that are considered to be commercial parking facilities. Shopping centre, hotel and hospital car parks charging penalty rates for all-day parking were no longer able to be ignored (as had been by some employers) when determining whether a commercial car park charged a fee over the daily car parking threshold (now $10.77 for the 2025 FBT year).

Following this further ATO guidance, some employers had in recent year included additional parking locations for FBT, which resulted in additional FBT cost.

However, the recent Federal Court case Toowoomba Regional Council v FCT [2025] FCA 161 (Toowoomba Council) has turned this on its head again, as the Court held that a specific car park was not a commercial parking station on the basis it as not being operated commercially for a profit. This decision is contrary to the ATO’s current view in Taxation Ruling TR 2021/2 (TR 2021/2), whereby it stated that certain shopping centre paid car parks that provide ‘free parking’ for a short period of time initially (usually two or three hours), and other car parks with similar arrangements, would be captured as ‘commercial car parking facilities’.

The Court concluded that to be a ‘commercial parking station’ for FBT purposes, a car park must be ‘deployed in commerce’ and be operated ‘commercially’, and ultimately that it was to be operated for the purpose of making a profit, noting specifically that the Judge noted “That is not to say that a profit must be present, only that there be some profit-making purpose.” There was further support for this view cited from the original explanatory memorandum to relevant law (Taxation Laws Amendment (Car Parking) Bill 1992), which specifically noted: “short term shopper parking facilities, using penalty rates for all day parking, will not be treated as a commercial parking station”.

We await further change in this space as the Commissioner has lodged an appeal on the decision.  

As a result of this case and other ATO guidance, car parking has again become a significant issue for some employers and the meaning of the term “member of the public” has also became increasingly important as it can impact the valuations available in order to reduce the FBT liability in respect of car parking where it arises. The ATO has advised it is working on preparing further guidance on the term “member of the public” for valuation purposes. Critically, employers should review their car parking arrangements to determine whether they are within a one-kilometer radius of a facility which is considered to be a ‘commercial parking station’ and monitor further updates from the ATO in due course. This should include considering third party car parking valuation support where applicable. We are happy to discuss your circumstances further as required.  

Critically, employers should review their car parking arrangements to determine whether they are within a one-kilometer radius of a facility which is considered to be a ‘commercial parking station’ and monitor further updates from the ATO in due course. This should include considering third party car parking valuation support where applicable. We are happy to discuss your circumstances further as required.  

d) FBT compliance measures

As has been the case for several years now, the ATO has continued to increase compliance and audit activities in relation to FBT and the interactions of FBT with other taxes. Their areas of focus have included documentation and substantiation, treatment of meal entertainment, as well as the use of vehicles and logbooks.

The ATO has also recently released detail as part of its Australian Tax Gap reviews, where it estimates that there is a net FBT gap of approximately $1.9b with reference to the 2022 FBT year – essentially identifying that the ATO only receives around 65% of the total FBT would expect to receive with full compliance from taxpayers.

The ATO has also noted the general downward trend in FBT collections since the 2015-16 peak of $4.3b down to 3.5b in 2022. The ATO has yet to release detail of more recent years.

Several key reasons for the reduction in FBT collections were noted by the ATO, including a reduction in car benefits provided and Covid led reductions due to changes in employee work patterns.  However, the ATO has specifically flagged that it has identified a general upward trend in unreported FBT, particularly amounts small and medium sized employers not registering for FBT or not appropriately including all benefits provided.

Accordingly, the ATO is devoting resources to try to close this gap and ensure increased participation in the FBT system by employers. This includes increased education for employers and Tax Agents, increased usage of third-party data (e.g. novated lease provider data or vehicle registration data) to identify noncompliance and programs or audit, review and letters to remind employers of their FBT obligations.

We note that the various Offices of State Revenue across the country also continue to undertake data matching exercises to ensure fringe benefits are appropriately disclosed for payroll tax purposes in the Annual Reconciliation. This background make it ever more important to ensure that FBT obligations are appropriately considered by your business.

This background make it ever more important to ensure that FBT obligations are appropriately considered by your business

Section Four: FBT Tips & Process Strategies

1. Identification of benefits

One of the key foundations to the preparation of the annual FBT return is the development of a thorough and repeatable process with respect to identifying what benefits are provided by the business to employees.

FBT is a unique tax which requires an analysis of data from many different systems. A combination of detail will be needed from many sources internally and externally to properly assess benefits, including any of the following sources:

• General ledger / trial balance accounts
• Expense management data
• Payroll detail
• Human Resources information
• Novated lease detail
• Car fleet detail
• Foreign entities
• Third party providers
• Car parking detail, including spaces and valuations
• Employee discount information

This typically means that FBT is a very time intensive tax to manage and is ultimately relatively data heavy when compared to other taxes.

A deep understanding of your business, how it operates, and how the costs of benefits are accounted for is required to be able to properly identify the benefits provided.

2. Use of technology to assist review

The nature of FBT requires assessment of a large volume of different data points from a variety of different sources. The data which needs to be analysed for the annual FBT return varies immensely from benefit to benefit. Adding to the complexity is the fact that even with an extension when lodging your return via a Tax Agent, the FBT return must be lodged less than 3 months after the end of the FBT year.

One of the ways to try to assist to not only the speed up the time taken to review but also to increase the accuracy of data review, is to utilise tax technology to assist with this process.  This can include simple measures within the business relating to coding in expense systems, the use of electronic logbooks for vehicles and the outsourcing of car fleet management, all the way up to the use of sophisticated data analytics techniques across certain benefits, such as meal entertainment or car parking entry and exit data review.

Consideration should be given to identifying where the time spent is highest in the FBT review process, and then seek to utilise technology to assist to reduce that time spend where possible.

4. ‘Otherwise Deductible Rule’

Generally, an employer does not have an FBT liability if the fringe benefits provided to an employee are “otherwise deductible”. The FBT rules provide that the taxable value of a fringe benefit is reduced to the extent that the employee could have claimed a tax deduction had they incurred the expense rather than the employer. In other words, if an expense is fully deductible to the employee, the taxable value of the equivalent benefit should be NIL.

If only a proportion of the expense would have been deductible for the employee (e.g. expenses incurred for partly private purposes), the taxable value of the fringe benefit is reduced by the proportion that would have been deductible.

The employer must also obtain a declaration from the employee that states the extent to which the expense is deductible. It is a requirement for the employer to retain documentary evidence such as the declaration for five years before discarding the evidence.

You refer to the ATO’s sample declarations that the employer can adopt for their employees.

5. Minor benefits exemption

(section 58P of the FBTAA) relates to the ability to exclude certain minor and infrequent benefits.

Whilst detailed guidance from the ATO on much of this below is limited, the specific criteria to be met when seeking to apply the exemption are as follows:

The benefit is:

• less than $300 (GST inclusive) in value;
• provided infrequently.
• not provided on a regular basis.
• not a specific reward for services provided;
• when considered overall, it is unreasonable to treat the benefit as a fringe benefit.

The exemption must be applied in conjunction with considering the provision of all other similar benefits. Careful consideration should be given prior to relying on this exemption.

Generate Citation