Fringe Benefits Tax for Small Business: A Plain-English Guide
Fringe Benefits Tax for Small Business: A Plain-English Guide
Short answer: if your business gives staff (or their family) something other than cash - a work car they use privately, the odd team lunch, a paid personal phone bill - you may have a Fringe Benefits Tax (FBT) obligation. FBT is a tax the employer pays on the value of those non-cash benefits, separate from income tax. The good news for most small businesses around Mortdale and the St George area: with a few exemptions and a bit of record-keeping, the bill is often small or nil. Here is the plain-English version.
What FBT actually is
FBT is a tax on certain benefits you provide to your employees, or to their associates (typically family members), in connection with their employment. The key points:
- The employer pays the tax, not the employee.
- It applies to non-cash benefits - things you give instead of, or on top of, salary.
- It is separate from income tax. You can have an FBT bill even in a year your business makes little profit.
A simple rule of thumb: if you are providing something of value to your team that is not ordinary salary, wages or superannuation, stop and ask whether FBT applies.
The FBT year (it is not the financial year)
This trips a lot of people up. The FBT year runs from 1 April to 31 March - different from the 1 July to 30 June income year. So the FBT year ending 31 March 2026 is its own reporting period, and you track benefits across those dates, not the usual financial-year dates.
The FBT rate
The FBT rate is 47%, and that rate applies across the FBT years ending 31 March 2023 through to 31 March 2027. Because the rate is high and matches the top marginal tax rate (plus Medicare levy), even modest benefits can attract real tax - which is exactly why the exemptions below matter so much.
Common benefits that can trigger FBT
For a typical small business, the usual suspects are:
- Cars - a business-owned or leased vehicle available for an employee's private use (including commuting and garaging at home).
- Entertainment and meals - staff parties, restaurant meals, event tickets and similar hospitality.
- Car parking - paying for or providing employee parking in certain circumstances.
- Expense payments - paying or reimbursing an employee's private expense, such as a personal phone or home internet bill.
Not every one of these will be taxable in every case - valuation rules and exemptions can reduce or remove the liability - but each is a flag to check.
Work-related items exemption
Certain work-related items are exempt from FBT where they are provided mainly for the employee's work. This commonly covers portable electronic devices - for example a mobile phone, laptop, tablet, portable printer or GPS unit - as well as items like tools of trade and protective clothing.
Generally you can provide one item per FBT year where items have a substantially identical function. Helpfully, small businesses (broadly, aggregated turnover under the relevant threshold) can provide an employee with more than one qualifying portable electronic device in an FBT year even if the items do similar things. For a small accounting-adjacent or trades business kitting out staff with a phone and a laptop, this exemption is often the difference between an FBT bill and none.
Minor benefits exemption
If a benefit is less than $300 (the "notional taxable value") and it would be unreasonable to treat it as a fringe benefit, it can be an exempt minor benefit. The under-$300 threshold is not an automatic free pass - the ATO weighs factors such as how often and regularly you provide the benefit, the total value of similar benefits, and how hard it is to value. Where you provide several connected benefits (say a meal, accommodation and a taxi), the $300 test applies separately to each. This exemption is handy for occasional gifts, the odd team coffee or a small Christmas gesture - keep them infrequent and under $300.
Lodging your FBT return and paying
If you have an FBT liability for the year, you generally need to lodge an FBT return and pay by 21 May following the end of the FBT year (so for the year ending 31 March 2026, that is 21 May 2026). If 21 May falls on a weekend or public holiday, it moves to the next business day.
If a registered tax agent lodges electronically for you, a later due date of 25 June can apply - but you must be on the agent's FBT client list before 21 May to qualify. If you have registered for FBT but have no liability for the year, you should still let the ATO know (a notice of non-lodgment) so you are not chased for an outstanding return.
Records you should keep
FBT is self-assessed, so good records are your protection. Keep:
- Logbooks and odometer readings for any work vehicles available for private use.
- Receipts and details for entertainment, meals and gifts (who, what, when, how much).
- Records of expense reimbursements and which were work-related.
- Any employee declarations and your FBT calculations and working papers.
Sort these as you go rather than at 31 March - it makes the return far easier and supports any exemption you rely on. Our EOFY checklist for small business is a good prompt for getting these in order.
How MJE can help
A little planning before you provide a benefit saves tax and stress later. As a registered tax agent based in Mortdale, we work with small businesses across the St George area - from sole traders with one work ute to growing teams with cars, phones and the occasional staff event. We review what you provide, work out whether FBT actually applies, and structure benefits to stay within the exemptions where possible.
If you would like a hand, see our business tax and business advisory services, or bookkeeping and payroll support to keep the records right year-round.
FAQ
Do I have to register for FBT? Only if you provide fringe benefits that give rise to an FBT liability. If, after applying exemptions, you have nothing taxable, you may not need to register at all. If you are registered but have no liability for a year, tell the ATO so they do not expect a return.
Is a work phone or laptop taxed? Usually not. Portable electronic devices provided mainly for work are generally exempt under the work-related items rules, and small businesses get extra flexibility to provide more than one similar device per year.
Are staff Christmas parties caught by FBT? They can be entertainment benefits, but the minor benefits exemption often helps if the cost per person is under $300 and the event is infrequent. The exact outcome depends on the cost, who attends and the method you use - worth a quick check with us.
Talk to us
Not sure whether FBT applies to something you provide your team? Have a chat before the FBT year closes on 31 March. Book a callback through our contact page or call MJE Business Services on (02) 9580 1167 - we will give you a straight answer and a plan.
This is general information, not personal advice. Tax rules and dates change - please check your situation with us or at ato.gov.au.
Sources (ATO)
Have a question about your situation?
We would rather give you a straight answer than have you guess. Book a callback and we will help.