Fringe benefits tax is a tax your business pays, not your employees, on non-cash benefits provided in connection with employment. It runs on its own calendar, has its own rate, and catches a surprising number of ordinary small business decisions, from letting staff take the work vehicle home to running a Christmas party. Here is what actually triggers it and where the genuine exemptions sit.
The FBT rate is 47%, and it has applied at that rate every FBT year since 1 April 2023, unchanged through to at least 31 March 2027. The FBT year runs from 1 April to 31 March, which is a different cycle to the income tax year, and it is easy to get the timing wrong if you are not tracking both separately.
The most common trigger is a work vehicle used privately, calculated either under the statutory formula method, a flat 20% of the car's base value regardless of actual private use, or the operating cost method, based on a valid 12-week logbook showing genuine business-use percentage. Without a logbook, you are generally stuck with the statutory formula, which is usually the more expensive option for vehicles with genuinely low private use. Car parking can also trigger FBT if it is provided near the primary workplace, within a kilometre of a commercial parking station charging more than the current threshold, for more than four hours between 7am and 7pm. There is a small business exemption from this specific rule if your parking is not itself in a commercial car park and your aggregated turnover is under $50 million.
The minor benefits exemption can exempt a benefit under $300 in notional value, based on how infrequent and irregular it is, not just the dollar figure alone. The work-related items exemption covers laptops, phones and tools of trade used mainly for work. Ordinarily this is limited to one item per employee per year, but small businesses with aggregated turnover under $50 million are exempt from that one-per-year cap and can provide multiple qualifying devices in the same year without triggering FBT.
This is where a lot of small businesses get caught out. An on-premises party held during the work day, food and drink only, under $300 per head, is more likely to qualify as exempt for employees. Take the same party off-site to a restaurant or venue and it becomes harder to rely on the minor benefits exemption, and more likely to be treated as entertainment. If partners or associates attend, that adds a second benefit to assess separately. And if you also give gifts at the same event, the gift's value has to be added to the food and drink cost when testing the $300-per-person threshold, not tested on its own. It is a common mistake to test the party and the gift separately and inadvertently go over the combined limit.
Staying under the $300 threshold and qualifying as a minor benefit generally avoids FBT, but it also generally means no income tax deduction and no GST credit for that spend, because of the non-deductible entertainment rules. Going over $300 usually triggers FBT at 47%, but the cost then becomes deductible and GST credits become claimable. It is worth actually modelling this rather than assuming staying under $300 is automatically the cheaper outcome.
The EV FBT exemption is still current, covering battery electric and hydrogen fuel-cell vehicles first held and used from 1 July 2022 onward, provided the vehicle's value stays under the luxury car tax fuel-efficient threshold. Plug-in hybrids were removed from eligibility from 1 April 2025, so an older PHEV purchase is not automatically covered anymore. The exemption removes the FBT liability itself, but the notional value still needs to be calculated and disclosed as a reportable fringe benefit.
Running a Christmas party, providing a work vehicle, or just not sure what your business is currently exposed to on FBT? Book a free call and we will go through it with you.
Not keeping a logbook for a work vehicle. Without one, the statutory formula applies by default, which is often the costlier outcome.
Testing party costs and gifts separately. Both need to be added together against the $300-per-person threshold, not assessed individually.
Assuming under $300 is automatically free. It usually avoids FBT, but it also usually removes the income tax deduction and GST credit on that spend.
Missing the small business turnover concessions. Many eligible small businesses with turnover under $50 million do not realise they are exempt from the one-item-per-year cap on work-related devices, or the car parking FBT rule.
FBT is charged at 47% on non-cash benefits provided to employees, calculated on its own April-to-March year. Work vehicles, car parking, and staff entertainment are the most common small business triggers, and the minor benefits exemption and work-related items exemption are the two most useful tools for staying under the threshold, provided you understand how they actually apply.
We review FBT exposure as part of our annual compliance work, with fixed fees agreed upfront. Book your free call here.
This article is general information only and does not take into account your personal circumstances. Please seek advice tailored to your situation before acting.
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