Fringe Benefits Tax Return
A Fringe Benefits Tax Return is a document lodged with the ATO to report tax on non-salary benefits provided to employees, required annually if you are an employer under the Fringe Benefits Tax Assessment Act 1986.
An annual form lodged with the ATO to report and pay tax on non-cash benefits provided to employees, such as company cars or loans.
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About this Document
A Fringe Benefits Tax Return is a specific document used by Australian employers to report benefits they provide to their employees or their employees families. These benefits are things that are not salary or wages. They are often called perks. In Australia, the Australian Taxation Office or ATO imposes a tax on the employer based on the value of these benefits. This tax is called Fringe Benefits Tax or FBT. This document is essential for any business owner or tradesperson who provides non-cash benefits to staff. This includes sole traders who have employees working for them. If you run a plumbing business and let your apprentice use the work ute on weekends, you must understand this return. If you run a construction firm and pay an employees gym membership, you need to understand this return. This guide will explain what the document is, when you need to lodge it, and how to fill it out correctly. We will look at the legal requirements set out in the Fringe Benefits Tax Assessment Act 1986. We will also refer to guidelines issued by the Australian Taxation Office. The information here is written in plain English so it is easy to understand. We avoid complex legal jargon where possible. We want to help you meet your obligations and avoid fines from the ATO.
What is a Fringe Benefits Tax Return? The Fringe Benefits Tax Return is the official form you use to tell the ATO about the fringe benefits you provided during the FBT year. The FBT year runs from 1 April to 31 March. This is different to the standard financial year which runs from July to June. You must lodge this return if you are a registered employer. The return calculates the amount of tax you owe. The tax rate is currently 47 percent. This is the highest marginal tax rate plus the Medicare levy. You pay this tax. You do not withhold it from your employees pay. The return covers various types of benefits. These include cars, car parking, entertainment, living away from home allowances, and expense payments. Even if the benefit is tax-free for the employee, you often still have to lodge a return and pay FBT.
When do you need to lodge a return? You need to lodge a Fringe Benefits Tax Return if you provide fringe benefits to your employees. This includes current employees, former employees, and associates of employees such as family members. You must lodge the return if you are liable to pay FBT. You must also lodge it if you are registered for FBT but have no FBT to pay. The ATO requires you to lodge the return by 21 May each year. If you use a registered tax agent to lodge your return, you might have longer. You should check with your agent or the ATO for the exact date. If you stop providing fringe benefits during the year, you might still need to lodge a return. You also need to cancel your FBT registration if you no longer need it.
How do you complete the return? Completing the Fringe Benefits Tax Return requires careful calculation. You must first identify every benefit you provided. You then calculate the taxable value of each benefit. The calculation method depends on the type of benefit. For example, for cars you usually use the statutory formula method or the operating cost method. For entertainment, you might use the 50 percent deduction method or the otherwise deductible rule. Once you have the taxable values, you gross them up. This means you increase the value to represent the gross salary the employee would have earned to pay the tax themselves. There are two gross-up rates. Type 1 is for benefits where you can claim a GST credit. Type 2 is for benefits where you cannot claim a GST credit. The return has specific labels for different types of benefits. You must total the grossed-up amounts. You then apply the FBT rate to the total taxable value to work out your tax liability. You can then claim credits for any FBT you have already paid during the year.
Legal Requirements and Legislation The main law governing this return is the Fringe Benefits Tax Assessment Act 1986. This Act defines what a fringe benefit is. It sets out the rules for calculating the taxable value. It also outlines the penalties for not lodging a return or for lodging a false return. The Taxation Administration Act 1953 also applies. This Act gives the ATO the power to collect taxes and enforce compliance. As an employer, you must keep detailed records for five years. This is a legal requirement. You must keep records that show how you calculated the taxable value of each benefit. For cars, you must keep a logbook if you use the operating cost method. The logbook must be kept for 12 continuous weeks. If you do not keep these records, the ATO may issue a default assessment. This could mean you pay more tax than necessary. The ATO website provides specific record keeping examples. You should follow these closely.
Common Mistakes to Avoid Many small business owners make mistakes with their FBT return. A common mistake is not declaring private use of business vehicles. If you have a ute or a van that an employee takes home, you might think it is exempt. However, the exemption only applies if the vehicle is designed to carry a load of one tonne or more. It also applies if it is a panel van or utility designed to carry goods. Private use must be limited to travel between home and work. Other travel must be incidental. If the employee uses the vehicle for grocery shopping or weekend trips, it is a fringe benefit. Another mistake is misunderstanding the minor benefits exemption. Benefits under $300 that are infrequent and irregular might be exempt. But you must apply the strict rules to every single benefit. A common error is forgetting to report entertainment. Christmas parties and staff functions can attract FBT. You must check the thresholds for these events. Failing to separate GST and non-GST amounts can also lead to errors. This affects the gross-up rate you use. Using the wrong gross-up rate will result in an incorrect tax amount.
Specific Scenarios for Tradespeople For tradespeople, the most common fringe benefit is a motor vehicle. Many builders, electricians, and plumbers provide vehicles to their staff. You must determine if the private use exceeds the allowable limit. If it does, you must calculate FBT. Another common benefit is tools or equipment. If an employee keeps a work laptop or tablet for private use, this is a fringe benefit. However, portable electronic devices are usually exempt if they are primarily for work. You can only get one exemption per device per year. Loans to employees are another area. If you lend money to an employee without charging interest or charging a low interest rate, it is a loan fringe benefit. You must calculate the fringe benefit value based on the benchmark interest rate.
Consequences of Non-Compliance If you do not lodge a Fringe Benefits Tax Return on time, the ATO will charge a failure to lodge penalty. This is a fine based on the size of your business. If you lodge a return that is incorrect, you may face general interest charges and penalties. The ATO audits FBT returns regularly. They use data matching to check vehicle registrations and third party records. If they find you have under-reported FBT, they will reassess your liability. They will also look at previous years. It is important to review your FBT position every year. Even a small change in how an employee uses a vehicle can change your FBT liability.
How to Lodge You can lodge your Fringe Benefits Tax Return electronically. Most business owners use a registered tax agent or accountant. They use Standard Business Reporting or SBR enabled software. You can also lodge using the paper form. However, the ATO encourages electronic lodgment because it is faster and reduces errors. Before you lodge, you must register for FBT if you have not done so already. You can register via the Business Portal or your tax agent. Once you lodge the return, you must pay the tax liability. The payment is usually due by 21 May. If you lodge electronically, you might have extra time to pay if you use a tax agent. You should check the ATO website for the specific dates each year. You can also pay by installments. The ATO will send you a notice if you are eligible to pay by installments.
Working with Professionals FBT is a complex area of tax law. The rules change frequently. Budget announcements often alter thresholds or rates. It is wise to engage a qualified accountant to help with your return. They can ensure you are claiming every exemption available. They can also help you structure your employee packages to minimize FBT. For example, they might suggest using salary sacrifice arrangements. In a salary sacrifice arrangement, an employee gives up some of their wage for a benefit. This can be tax effective for both the employer and the employee. However, you must have a written agreement. The agreement must be made before the employee starts work or before they are entitled to the pay.
Summary The Fringe Benefits Tax Return is a critical compliance document for Australian businesses. It ensures that the tax system treats non-cash benefits fairly. While it adds a layer of administration to your business, understanding it is vital. By keeping good records and knowing the rules, you can manage your FBT liability. This guide covers the basics. You should read the ATO guides on specific fringe benefits for more detail. The ATO website has a section called Fringe benefits tax (FBT) for employers. It is a resource. Remember that this information is current as of the 2024 FBT year. You should always check for recent updates. The Fringe Benefits Tax Assessment Act 1986 is the primary legislation. It overrides any general information provided in guides. If you are unsure about any aspect of your FBT return, seek professional advice. Getting it right the first time saves you time and money in the long run.
Key Facts
- The FBT year runs from 1 April to 31 March, distinct from the standard financial year.— Australian Taxation Office (ATO)
- The FBT rate is currently 47 percent, equal to the top marginal tax rate plus Medicare levy.— Fringe Benefits Tax Assessment Act 1986 (Cth)
- Employers must lodge the annual FBT return by 21 May unless using a tax agent.— Taxation Administration Act 1953 (Cth)
- Private use of business vehicles is a common fringe benefit for tradespeople unless specific exemption criteria are met.— Fringe Benefits Tax Assessment Act 1986 (Cth)
- Records used to calculate FBT must be kept for a minimum of five years.— Australian Taxation Office (ATO)
- A benefit under $300 may be exempt if it is infrequent, irregular, and not hard to value.— Fringe Benefits Tax Assessment Act 1986 (Cth)
Sources
Required Sections
Business Details
Basic identification of the employer lodging the return
Section 1: Business Details
Business Name
Write the full legal name of your trading entity. This must match the name registered with the Australian Securities and Investments Commission (ASIC) or the name recorded on your Australian Business Number (ABN) registration. If you operate as a sole trader using your personal name, write your full legal name here. Do not use a trading name unless it is your registered legal business name.
Australian Business Number (ABN)
Enter your 11-digit Australian Business Number. You must leave the ABN field blank if you are a non-resident employer who does not have an ABN. Your ABN acts as your unique identifier for the Australian Taxation Office (ATO). The ATO uses this number to match your FBT Return to your other tax obligations, such as your Income Tax Return and Business Activity Statement (BAS). Ensure the number is correct to avoid processing delays or penalties.
Contact Number
Provide a reliable phone number where the ATO can contact you or your registered tax agent during standard business hours. Use the number for your main business office. If you use a tax agent to manage this return, provide your agent's contact details here. The ATO uses this number if they need to clarify information in your return.
Fringe Benefits Tax (FBT) Year
Specify the FBT year you are reporting. The FBT year in Australia runs from 1 April to 31 March. This differs from the standard financial year.
For example, if you are reporting benefits provided from 1 April 2023 to 31 March 2024, you write the year as ending 31 March 2024. Ensure you select the correct year. The FBT rates and thresholds can change annually based on federal budget updates. Reporting the wrong year may lead to incorrect tax calculations under the Fringe Benefits Tax Assessment Act 1986.
Postal Address
Write the postal address where you want the ATO to send any correspondence regarding this return. This must be a valid Australian postal address. If a different person handles your business mail, such as an accountant or a bookkeeper, use their address here.
You must complete all these fields accurately. Under the Taxation Administration Act 1953, you have a duty of care to provide correct information. Failure to provide accurate details may result in delays or penalties. If any of your business details have changed recently, such as a change of address or business name, update your details with the ATO before lodging this return. You can update your details via the ATO Business Portal or by phoning the ATO.
Summary of Taxable Benefits
Total value of benefits calculated for the return
Summary of Taxable Benefits
This section details the final calculation of your Fringe Benefits Tax (FBT) liability. You must report the total taxable value of benefits provided to your employees, including their family members or other associates. The Australian Taxation Office (ATO) requires you to separate these benefits into two distinct categories. These are known as Type 1 and Type 2 benefits. The separation is necessary because different gross-up rates apply to each type depending on whether you claimed an input tax credit for the GST paid on the benefit.
Type 1 Benefits
Type 1 benefits are those where you are entitled to claim a GST credit. For tradespeople, this typically includes expenses like motor vehicle repairs, tools of trade, or work-related electronics purchased for employee use where the business claimed the GST credit.
To calculate the amount for the return, you must gross-up the taxable value of these benefits. You must use the Type 1 gross-up rate. The current Type 1 rate is 2.0802. This rate reverses the GST credit you claimed, ensuring the tax is applied to the full pre-tax value. You should write the total grossed-up amount at the relevant label on the return.
Type 2 Benefits
Type 2 benefits are those where you cannot claim a GST credit. Common examples include expense payments, rent payments, or the provision of residential accommodation where GST is not applicable or not claimable.
For these benefits, you must apply the Type 2 gross-up rate. The current Type 2 rate is 1.8868. This rate adjusts the value to reflect the gross salary employees would need to earn to pay for the benefits themselves. Record this total grossed-up amount at the specific label for Type 2 benefits.
Total Taxable Value and FBT Payable
To find your total FBT payable, add the grossed-up amounts from Type 1 and Type 2 benefits together. This sum represents your total taxable value.
The FBT rate for the FBT year ending 31 March 2024 is 47 percent. You calculate the final tax by multiplying the total taxable value by this rate. Ensure you cross-reference these calculations with the Fringe Benefits Tax Assessment Act 1986 to verify your compliance.
You can then subtract any FBT rebates you may be eligible for, such as the Not-for-Profit rebate, to arrive at the final amount payable. If you have made instalments throughout the year, subtract these from the total tax to determine any refund or balance owing. Keep all records supporting these figures for five years as required by tax law.
Payment and Declaration
Final calculation of payment owed and signatory details
Instalments Already Paid
Review the total amount of Fringe Benefits Tax (FBT) you have paid during the FBT year ending 31 March. If you paid instalments through the Australian Taxation Office (ATO) business activity statement (BAS) system, enter the total of those payments here. You must match these figures against the records in your ATO business portal to ensure accuracy. This amount acts as a credit against your total FBT liability for the year.
Balance Due or Refundable
Subtract your total instalments from your FBT liability to find the final result. If your total liability is higher than the instalments paid, you must pay the balance. This amount is due for payment by the date shown on your activity statement or notice of assessment, typically 21 May if you lodge electronically, or 21 June if you lodge by paper. You can pay via BPAY, credit card, or direct debit. The Tax Administration Act 1953 outlines the strict due dates for payment.
If your instalments paid are higher than your total liability, the ATO will hold this amount as a credit. You can request a refund of this credit. The ATO generally processes refund claims within 14 business days of receiving your return, provided they have all necessary information. Check your contact details in the ATO business portal are correct so they can reach you if they need to verify your claim.
Declaration
The person lodging this return must sign the declaration to confirm the information is true and correct. You can be an individual, a partner in a partnership, or a director of a company.
You must be authorised to sign on behalf of the entity. For a company, this must be a public officer, a director, or a company secretary. For a trust, it must be a trustee. The Taxation Administration Act 1953 creates legal obligations for this signature. By signing, you declare that you have made a reasonable effort to estimate your FBT liability based on the Fringe Benefits Tax Assessment Act 1986.
If a registered tax agent lodges this return on your behalf, you still retain ultimate responsibility for the information provided. Providing false or misleading information can lead to significant penalties under the Taxation Administration Act 1953. Ensure you calculate your taxable value correctly using the appropriate gross-up rates. The statutory rate or the alternative rate applies depending on the type of benefit and the total reportable fringe benefits amount. Keep your records for at least five years in case the ATO reviews your return.
Optional Sections
Motor Vehicles
Details of car or vehicle fringe benefits provided
Use this section to record the details of every motor vehicle you provided to your employees that resulted in a fringe benefit. You must report these details to the Australian Taxation Office (ATO) to calculate your Fringe Benefits Tax (FBT) liability. You need to include cars, utilities, and certain other road vehicles designed to carry a load of less than one tonne or fewer than nine passengers. Vans designed to carry a load of one tonne or more, or nine or more passengers, are generally exempt unless the private use of the vehicle is limited. You should consult Taxation Ruling TR 96/16 to check if your specific utility or panel van is exempt.
Vehicle Details For each vehicle, list the make, model, and registration number. You must state the total number of vehicles you held during the FBT year (1 April to 31 March). If you own a fleet of vehicles, you may choose to use the statutory formula method for the entire fleet. You must make an election to use the operating cost method for the entire fleet before the start of the FBT year if you wish to use it. You cannot switch methods for different vehicles within that fleet once the year begins.
Valuation Method Select the valuation method you used to calculate the taxable value. You generally choose between the statutory formula method and the operating cost method. The statutory formula method uses a flat rate of 20 per cent of the base value of the car, regardless of actual distance travelled. This is often simpler but may result in a higher taxable value if the vehicle travels high kilometres for work.
The operating cost method considers the actual business use of the vehicle. To use this method, you must maintain a valid logbook for a continuous period of at least 12 weeks. You also need to keep odometer records at the start and end of the FBT year and retain all receipts for operating costs like fuel, oil, repairs, and registration. The taxable value is the total operating costs multiplied by the percentage of private use. You must keep these records for five years as required by the Taxation Administration Act 1953.
Taxable Value Enter the taxable value for each vehicle. This is the final amount after applying the relevant valuation method. If you paid for some of the vehicle's running costs using employee contributions, or if the employee reimbursed you for private use, you must subtract these contributions from the taxable value. These contributions must be made from the employee's after-tax income. Ensure the total taxable value reported here matches the calculations in your FBT worksheets. If you made an error in a previous year, you may need to lodge an amendment.
Living Away From Home Allowances
Details of LAFH allowances provided to employees
Living Away From Home Allowances (LAFHA)
Use this section to report allowances paid to employees who must live away from their usual residence to perform their employment duties. You must separate the total payment into the taxable component and the exempt component. The Australian Taxation Office (ATO) scrutinises these claims closely under the Fringe Benefits Tax Assessment Act 1986 (FBTAA). You can only claim an exemption if the employee maintains a normal home in Australia that they intend to return to and they incur reasonable accommodation and food costs.
Total Allowance Paid
Record the full gross amount of the Living Away From Home allowance paid to the employee during the FBT year. Do not deduct any amounts at this stage.
Taxable Value
The taxable value is the portion of the allowance exceeding the reasonable amount for food and accommodation, or any part paid where the employee does not meet the strict eligibility criteria. You must calculate this value using the statutory formula method or the actual cost method outlined in Division 2 of the FBTAA.
If you pay an amount that covers costs above the reasonable benchmarks set by the ATO, the excess is immediately taxable. For example, if the ATO reasonable food component for a specific income tier is $42 per week but you pay $70 per week, the difference of $28 per week is a taxable fringe benefit.
Exempt Component
Record the amount of the allowance that qualifies for a concessional tax treatment. To be exempt, the allowance must be solely for compensating the employee for additional expenses incurred because they are living away from home. Under the Fringe Benefits Tax (Living-Away-From-Home Allowances) Determination 2014, you must be able to substantiate these expenses.
The exempt component is limited to the reasonable amount for accommodation costs and the statutory food amount. You cannot claim an exemption for general living expenses or domestic costs. If the employee has a spouse or children accompanying them, the exemption may extend to half the reasonable food amount for the employee and half for each dependent, provided you hold written evidence of their actual accommodation costs. Ensure you have a compliant declaration from the employee confirming their usual home is maintained and they intend to return to it. Without a current declaration, the entire allowance is taxable.
Entertainment and Recreation
Details of food, drink and recreation benefits
Entertainment and Recreation
Use this section to report the total value of entertainment benefits you provide to employees. Entertainment includes food, drink and recreation. You must also report accommodation or travel connected with this entertainment.
Common examples for tradespeople and small businesses include:
- Staff parties and social functions.
- Client lunches or dinners.
- Gifts of food or drink, like hampers or bottles of wine.
- Corporate box facility costs at sporting venues.
- Friday afternoon drinks or snacks provided in the office.
You must calculate the taxable value of these benefits under the Income Tax Assessment Act 1936 and Fringe Benefits Tax Assessment Act 1986.
Valuation Methods
You can choose how to work out the tax, depending on your records. The two main methods are the 50/50 split method and the actual method.
50/50 Split Method You may use this method for food and drink provided to employees on your business premises. This method assumes half the food and drink is for employees (taxable) and half is for others like customers (exempt). You only pay FBT on the 50% attributed to employees.
Actual Method You use the actual consumption figures to determine the portion provided to employees versus non-employees. This method requires detailed records but might lower your liability if you entertain clients more often than staff.
Property Exemption
Under Section 41 of the Fringe Benefits Tax Assessment Act 1986, you can claim a property exemption for minor benefits that are not primarily for entertainment. For this to apply, the food or drink must not be entertainment. It must be consumed by the employee during work hours, on a working day, and be a typical meal like morning tea or lunch.
If you classify food and drink as 'otherwise deductible' under this exemption, do not report it here. Report it at the Property label instead.
Minor Benefits Exemption
The minor benefits exemption applies to benefits with a taxable value of less than $300. You must consider the frequency, cost and identity of the recipient. For example, buying the team a round of drinks once a year usually qualifies. Providing a $299 gift voucher every month does not. If an entertainment benefit is exempt under this provision, do not include it in your total.
Corporate Box Expenses
If you lease a corporate box, you must calculate the taxable value based on the number of days you use it for entertainment. You apply the lowest of the notional tax, the 50/50 split method or the actual method. A corporate box used for business meetings without food or drink may qualify for the property exemption.
Ensure you keep records showing the date, time, location and attendees for all entertainment events. The Australian Taxation Office requires these records to substantiate your claims.
Frequently Asked Questions
What is a Fringe Benefits Tax Return?
When do I need a Fringe Benefits Tax Return?
Is a Fringe Benefits Tax Return legally required in Australia?
What is the due date for the FBT return?
Do I pay FBT on work vehicles?
What is the current FBT rate?
Can I claim a deduction for FBT paid?
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