Understanding how FBT works is essential to avoid penalties and ensure you’re managing staff perks effectively. Here’s what every small business owner should know.
What is Fringe Benefits Tax (FBT)?
Fringe Benefits Tax is a separate tax applied to certain non-cash benefits that employers provide to employees or their associates. Unlike income tax, which employees pay on wages, FBT is paid by the employer.
The Australian Taxation Office (ATO) calculates FBT based on the taxable value of the benefits provided. In short: if your business offers perks outside of salary, the ATO expects you to pay tax on them.
Who Needs to Pay FBT?
FBT applies to most business structures in Australia, including:
- Companies – regardless of size
- Sole traders – if employing staff
- Partnerships – where employee perks are offered
- Trusts – if non-salary benefits are provided
If you fall into these categories, you’re required to:
✅ Register for FBT with the ATO
✅ Lodge an annual FBT return
✅ Pay FBT either quarterly or annually
👉 Key point: FBT is always paid by employers, not employees.
Common Fringe Benefits That Attract FBT
Not all perks are taxable, but many popular employee benefits are. Below are the most common:
| Benefit Type | Examples |
| Car Benefits | Allowing staff to use company vehicles for personal purposes |
| Entertainment | Meals, drinks, concert tickets, holiday parties |
| Expense Payments | Covering private expenses such as school fees |
| Housing Benefits | Providing free or discounted accommodation |
| Loan Benefits | Offering staff loans at low or no interest |
| Living Away From Home | Providing allowances for staff working interstate or remotely |
Being aware of which perks attract FBT helps you plan smarter and avoid surprise costs.
Why FBT Matters for Small Businesses
For many business owners, FBT can feel like a hidden tax—but ignoring it can lead to:
- Unexpected tax bills
- ATO penalties or interest charges
- Inaccurate budgeting
On the upside, knowing which benefits are taxable allows you to design staff perks that are both motivating and tax-efficient.
Perks can be a fantastic way to reward employees, but they come with tax implications. By understanding what FBT is, who pays it, and which benefits are included, small businesses can stay compliant and avoid unnecessary costs.
Need help managing your FBT obligations? Business Genie offers a free 30-minute consultation to walk you through the rules and ensure you don’t pay more tax than necessary.
👉 Book your free consultation today and make FBT simple for your business.
