Evidence-backed. Sourced from the ATO, Bentleys, ScaleSuite, Vistra, Coleman Greig, Vincents and Andersen Australia. General information only — not financial or tax advice. Your FBT situation depends on your employer, your specific benefits and your circumstances. Consult a registered tax agent or financial adviser. Last updated: June 2026.
⚡ Key Takeaways
- FBT is paid by your employer — not you — on the non-cash benefits they provide you. The FBT rate is 47% (matching the top marginal rate), and the FBT year runs 1 April to 31 March (not the standard tax year). [1][2]
- FBT doesn’t appear in your income tax bill — but if your benefits’ taxable value exceeds $2,000, your employer reports a Reportable Fringe Benefits Amount (RFBA) on your income statement. This isn’t taxed as income, but it IS included in income tests for HECS-HELP repayments, Medicare levy surcharge, some Centrelink payments and child support. [6][3]
- Common fringe benefits include: novated lease cars used privately; car parking; cheap or forgiven loans; discounted housing; meal entertainment; and employer-paid expenses like school fees, health insurance premiums and utility bills. Salary and wages are not fringe benefits. [2][7]
- Electric vehicles (battery and hydrogen) below the luxury car tax threshold, first held or used after 1 July 2022, remain FBT-exempt in 2026. PHEVs lost this exemption from 1 April 2025 — new PHEV novated lease arrangements are now fully subject to FBT. Only pre-1 April 2025 arrangements not significantly varied may still qualify. [4]
- A Federal Court decision handed down 5 June 2025 (FCT v SEPL Pty Ltd ATF SFT Trust) confirmed that non-cash benefits provided to directors can be fringe benefits even without a formal employment contract — broadening the “in respect of employment” test. [12]
- The ATO’s 2026 FBT focus areas: car fringe benefits (logbook accuracy and business-use percentage claims), car parking, meal and entertainment benefits, and NFP employers testing their capping thresholds. [6][11]
Fringe Benefits Tax 2026: What Every Australian Employee Needs to Know
By The Fine Print editorial team | Last updated: June 2026 | 10 min read | ⚠️ Not financial advice
Fringe benefits tax is one of the most misunderstood parts of the Australian tax system — partly because your employer pays it, not you. But it shows up on your income statement, and it can quietly push you above thresholds for HECS repayments, the Medicare levy surcharge and Centrelink payments. If you salary-package a car, get free parking, or receive any non-cash perk from your employer, this article explains exactly what FBT is, how it affects you in 2026, and what changed with electric and plug-in hybrid vehicles last year.📋 What’s in This Guide
- How FBT works — who pays, what rate, what year
- What counts as a fringe benefit (and what doesn’t)
- The Reportable Fringe Benefits Amount and why it matters
- Salary packaging and FBT — when it actually helps
- Electric vehicles and the 2025 PHEV change
- ATO’s 2026 FBT focus areas
- Three actions to take now
- Frequently asked questions
How FBT Works — Who Pays, What Rate, What Year
Fringe benefits tax is a separate tax your employer pays on non-cash benefits they provide you. It operates entirely outside the income tax system: your employer reports and pays it on their own FBT return, and the government receives revenue from the employer — not from you. [1][2]The FBT rate is 47% — intentionally set to match the top marginal income tax rate plus the Medicare levy, so there’s no incentive to disguise salary as tax-free perks. To calculate the tax, employers gross up the “taxable value” of benefits using one of two rates depending on whether they can claim a GST input tax credit on the benefit: Type 1 gross-up rate is 2.0802 (for GST-creditable benefits); Type 2 is 1.8868 (for non-GST benefits). The 47% rate then applies to this grossed-up figure. [2][6]📅 The FBT year runs 1 April to 31 March — not the standard 1 July to 30 June income tax year. FBT returns are due by 21 May (or later if lodged through a tax agent). This matters when calculating how long a benefit was provided: a car benefit starting in January 2026 runs across two FBT years. [2]
What Counts as a Fringe Benefit (and What Doesn’t)
A fringe benefit is broadly: any benefit provided to an employee (or their associate) in respect of employment that isn’t salary, wages or super. The ATO identifies several main categories: [2][7][6]Common fringe benefits:
- Car fringe benefits: Personal use of an employer-owned or leased vehicle (including novated leases). Calculated under the statutory method (flat 20% of the car’s cost per year) or the operating cost method (based on actual running costs and a logbook showing business vs private use).
- Car parking: If your employer provides car parking within a kilometre of a commercial parking station that charges more than the daily threshold ($10.40 for FBT year ending 31 March 2026), it’s a fringe benefit.
- Loan fringe benefits: Loans made to you at below the benchmark interest rate (5.97% for the FBT year ending 31 March 2026).
- Expense payment benefits: Your employer pays expenses you’d normally pay personally — school fees, health insurance premiums, gym memberships, phone bills.
- Housing benefits: Employer-provided accommodation below market rent.
- Meal entertainment: Employer-paid meals, entertainment, hospitality — subject to specific valuation rules.
- Board benefits: Accommodation and/or meals for employees working in remote areas or on fly-in fly-out rosters (some exemptions apply).
What is NOT a fringe benefit:
- Salary and wages
- Employer super contributions (SG or salary sacrifice super)
- Employment termination payments
- Benefits exempt under specific rules (e.g. work-related items like laptops, tools of trade, eligible EV cars)
- Minor benefits below $300 that are infrequent and irregular (the minor benefit exemption)
The Reportable Fringe Benefits Amount — and Why It Matters
If the total taxable value of your fringe benefits exceeds $2,000 in an FBT year, your employer must report a Reportable Fringe Benefits Amount (RFBA) on your income statement at year-end (accessible via myGov). The RFBA is the grossed-up value of your benefits — Type 1 benefits grossed up by 1.8868 for this purpose; Type 2 by 1.8868. [3][6]⚠️ The RFBA isn’t taxed as income — but it IS included in “adjusted fringe benefits total” which feeds into several income tests. These include: your HECS-HELP compulsory repayment threshold (the RFBA is multiplied by 0.53 and added to your income); the Medicare levy surcharge income test; some Family Tax Benefit, Childcare Subsidy and other Centrelink income tests; and child support assessment. If your RFBA pushes you over one of these thresholds, the consequences can far outweigh the benefit of the perk. [6][3][8]
Example: An employee earns $85,000 and has $9,000 in reportable fringe benefits. Their adjusted income for HECS purposes becomes $85,000 + ($9,000 × 0.53) = $89,770. This may push them into a higher HECS repayment rate bracket even though no extra cash income has been received. [6]Salary Packaging and FBT — When It Actually Helps
Salary packaging (also called salary sacrifice) means agreeing with your employer to receive some of your pay as non-cash benefits rather than salary. For FBT-exempt or FBT-rebatable benefits, this can be tax-effective — you use pre-tax dollars to fund a benefit that the employer doesn’t have to pay FBT on. [7][9]For employees of public benevolent institutions and other NFPs:
Certain not-for-profit employers get FBT exemptions or rebates that allow employees to package a significant amount of expenses (up to $15,900 for PBIs/health promotion charities; $9,010 for hospitals and public ambulance services under some arrangements) tax-free. These are powerful but have specific caps. If your employer is an NFP, ask HR about the capping thresholds. [6][10]For private-sector employees:
The main FBT-effective packaging options are work-related items (laptops, tools, professional subscriptions) and eligible electric vehicles. Standard benefits like cars and car parking generate FBT that the employer typically passes back to you through your package — so you don’t save as much as it might appear. The gross-up rate and 47% FBT rate mean the “grossed-up” cost of a private-sector packaged car can eliminate most of the income tax saving. Always ask for a clear cost-benefit comparison from your payroll or HR team before entering a salary packaging arrangement. [7][9]Electric Vehicles and the 2025 PHEV Change
What’s still exempt (battery EVs and hydrogen fuel cell vehicles):
Under legislation enacted in late 2022, eligible electric cars remain FBT-exempt in 2025–26. The conditions: the car must be a zero-emissions vehicle (battery electric or hydrogen fuel cell); it must be under the luxury car tax threshold ($91,387 for 2025–26); and it must have been first held and used on or after 1 July 2022. The employer can provide the car through a novated lease or directly. [4]⚠️ PHEVs lost the exemption from 1 April 2025. Plug-in hybrid electric vehicles are no longer FBT-exempt for arrangements entered into or significantly varied on or after 1 April 2025. Only a PHEV under an arrangement that: (1) was in place before 1 April 2025; and (2) has not been significantly varied since, can continue to claim the exemption. If you signed a new PHEV novated lease in April 2025 or later, FBT applies. If you’re considering a PHEV in 2026, get specific advice before signing — the FBT cost can be substantial. [4][6]
💡 Home charging costs for exempt EVs: ATO’s PCG 2024/2 provides a simplified rate of 4.2 cents per kilometre for home-charging costs on exempt electric vehicles. Employers can use this rate instead of calculating actual electricity costs — making it simpler to factor in the true running cost of an EV novated lease. [5]
ATO’s 2026 FBT Focus Areas
The ATO has signalled its 2026 FBT compliance focus. Key areas where the ATO is scrutinising claims and employer lodgements: [6][11][10]- Car fringe benefits — logbooks and business-use claims: The operating cost method relies on a valid logbook (kept for at least 12 consecutive weeks, valid for up to five years). The ATO is reviewing logbook accuracy and whether claimed business-use percentages are realistic. If your employer uses this method for your vehicle, ensure your logbook is current and genuinely reflects your usage.
- Car parking benefits: The ATO has expanded car parking benefit rules in recent years. Employers near commercial parking stations charging above the threshold must assess whether employee parking is a fringe benefit. The ATO is cross-referencing proximity data and parking station rates.
- Meal and entertainment benefits: The distinction between exempt minor benefits (occasional, irregular, under $300) and taxable entertainment is a common error. Team lunches that happen monthly are not minor benefits.
- NFP capping thresholds: The ATO is checking that employees of NFP employers are staying within their grossed-up capping limits and that employers are correctly valuing packaged benefits.
- FBT lodgement and nil returns: Some employers believe they have no FBT liability and don’t lodge — but the ATO may have data suggesting otherwise. If an employer provides any benefits (even occasional car use, parking, or expense payments), a review is warranted.
✅ Three Actions to Take Now
Action 1: Get your RFBA and understand what it does to your income tests
Log into myGov → ATO → Tax → Income Statements and check whether your employer has reported a Reportable Fringe Benefits Amount for 2024–25 (reported after 31 March 2025; the 2025–26 RFBA will appear after 31 March 2026). If you see an RFBA, note the figure and ask your payroll team how it’s calculated — which benefits generate it and what the taxable values are. Then check whether the RFBA pushes your adjusted income over any relevant threshold: HECS repayment rate changes; Medicare levy surcharge income test; Family Tax Benefit or other Centrelink tests if applicable. If you have HECS-HELP debt, the RFBA × 0.53 calculation is the one most likely to affect you — even moderate packaging can push you into a higher repayment bracket. [6][3]Action 2: Do an honest cost-benefit review of your salary packaging
Salary packaging isn’t automatically beneficial. For NFP employees using the genuine FBT exemptions, it usually is — the numbers work clearly in favour of packaging lifestyle expenses. For private-sector employees with car packaging or car parking, the maths is less clear: the employer’s FBT cost is typically passed back, and the RFBA may affect your income tests. Ask your employer or a tax agent for a written cost-benefit analysis that includes: the total value of the benefit; the FBT your employer will charge back to your package; the reduction in take-home salary; and the impact on your RFBA and income tests. A benefit that looks like a $5,000 salary saving before accounting for the RFBA’s effect on HECS or childcare subsidy may be worth much less in practice. [7][9]Action 3: If considering an EV or PHEV novated lease, verify the current rules before signing
Battery electric vehicles and hydrogen fuel cell cars under the LCT threshold remain FBT-exempt — this is one of the clearest financial advantages available to employees in 2026. But PHEVs are no longer exempt for new arrangements from 1 April 2025. If you signed a PHEV lease before that date and haven’t significantly varied it, you may still be exempt — but confirm this with your employer or a tax agent before assuming so. For anyone considering a novated lease in 2026: stick to a battery EV for the cleanest FBT outcome. If you want a PHEV, get specific advice on whether FBT applies to your arrangement and quantify the cost before committing to a multi-year lease. Use the ATO’s PCG 2024/2 rate of 4.2c/km when estimating home-charging costs for an exempt EV. [4][5]❓ Frequently Asked Questions
What is FBT and who pays it?
FBT is a tax paid by your employer on non-cash benefits they give you. The rate is 47%. The FBT year runs 1 April–31 March. You don’t pay it directly, but a Reportable Fringe Benefits Amount (RFBA) on your income statement can affect several income tests. [1][2]Are EVs still FBT-exempt in 2026?
Yes — battery EVs and hydrogen cars below the LCT threshold, first held after 1 July 2022, remain exempt. PHEVs lost the exemption from 1 April 2025 for new or significantly varied arrangements. [4]Does my RFBA affect my HECS repayments?
Yes. RFBA × 0.53 is added to your income for the HECS repayment test. This can push you into a higher repayment bracket without any actual extra cash income. Check your income statement via myGov. [6][3]Is salary packaging always worth it?
Not always. NFP employees using genuine exemption caps often see clear benefits. For private-sector employees packaging cars or parking, the employer typically passes back the FBT cost and the RFBA can affect income tests — making the net advantage much smaller than it appears. Get a full cost-benefit analysis before committing. [7][9]⚖️ The Fine Print Verdict
FBT is one of those taxes that most employees know exists but don’t really understand — because your employer deals with the paperwork. But “my employer pays it” doesn’t mean it can’t hurt you. The Reportable Fringe Benefits Amount sits quietly on your income statement and can add thousands to your adjusted income for HECS, MLS and Centrelink tests. Salary packaging looks like free money until you account for the FBT passback and the RFBA’s downstream effects. And the PHEV rule change from April 2025 caught many employees mid-lease — PHEVs are now just regular taxable benefits for any new arrangement. The good news: battery EVs below the LCT threshold are still genuinely FBT-free in 2026, and for NFP employees the packaging caps are legitimate and powerful. The rule with FBT is simple: always calculate the all-in cost, not just the headline saving.
👉 Check your RFBA. Model the real cost of your packaging. Verify your EV or PHEV status before signing anything.
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Plain-English breakdowns of Australian money news every week — no jargon, no spam.📚 Sources & References
- ATO, “Fringe benefits tax (FBT),” ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax
- ATO, “How FBT works,” ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/how-fringe-benefits-tax-works
- ATO, “FBT — a guide for employers,” ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/fbt-a-guide-for-employers
- ATO, “Electric cars exemption,” ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/electric-cars-exemption
- ATO, “PCG 2024/2 — Electricity costs for electric vehicles,” ato.gov.au/about-ato/legal-database
- Bentleys, “FBT Focus 2026,” bentleysqld.com.au/knowledge-hub
- ScaleSuite, “Fringe Benefits Tax in Australia — 2026 Guide,” scalesuite.com.au/resources/fringe-benefits-tax-australia
- Vistra, “Fringe Benefits Tax 2025/26,” vistra.com/australia/insights
- Coleman Greig, “Fringe Benefits Tax 2025/26,” colemangreig.com.au
- Vincents, “FBT 2026,” vincents.com.au
- Andersen Australia, “FBT year 2025-26 overview,” andersen.com.au
- Federal Court of Australia, FCT v SEPL Pty Ltd ATF SFT Trust [2025] FCA (5 June 2025)
- ATO, “FBT lodgement,” ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/reporting-and-paying-fringe-benefits-tax
This article is general information only and does not constitute financial or tax advice. FBT rules, exemption thresholds and income test impacts depend on your specific employer arrangements and personal circumstances. Consult a registered tax agent or financial adviser for advice tailored to your situation. The Fine Print 🇦🇺 is not affiliated with the ATO or any employer or super fund.