Home » community » News » 2024-25 Fringe Benefits Tax (FBT) – Is Your Business Compliant?

2024-25 Fringe Benefits Tax (FBT) – Is Your Business Compliant?

The 2024-25 FBT Year ends on 31 March 2025…

Attracting and retaining the best employees for your business is important – and many find that providing extra frills beyond traditional remuneration packages can be a great incentive to choose your business over another. A potential downside to this is that certain benefits may attract Fringe Benefits Tax (FBT) of 47%. Over recent years, the Australian Taxation Office (ATO) has put FBT compliance under the microscope, therefore it is critical to ensure that your business remains FBT compliant. To help you get started on the preparation for FBT year-end on 31 March 2025, here is an overview of FBT and some common benefits that may attract it.

Fringe Benefits Tax (FBT) Overview

FBT is a tax paid by employers on certain non-cash benefits provided to employees, or an employee’s family or associates. FBT is separate from income tax, and the amount payable is based upon the taxable value of the fringe benefit itself. Employers are obligated to self-assess their FBT liability each year during the period 1 April – 31 March, and should a liability be found, an FBT return and subsequent payment to the ATO is required.

Motor Vehicles

The concept of providing an employee with a car as part of their employment is a well-known benefit.  That being said, many employers are still unaware that this provision may carry an FBT obligation, generally arising when the employee is allowed to use the vehicle for private use. As far as the ATO is concerned, a car is any of the following:

• a sedan or station wagon
• any other goods-carrying vehicle with a carrying capacity of less than one tonne, for example a panel van or utility (including four-wheel drive vehicles)
• any other passenger-carrying vehicle designed to carry fewer than nine passengers.

As for their definition of “private use”, the ATO considers a vehicle available for such if an employee or their associates (partner, spouse, family member etc.) uses it for private trips, or are allowed by the employer to do so, on any given day. Also worth considering is where a vehicle is stored – garaged near or at an employee’s house is considered to indicate private use, even if it just for security reasons. This also applies when the place of employment and employee’s residence are the same.

The golden rule is to maintain a logbook! A tax accountant can then assess all available concessions that apply to you when it comes time to preparing your FBT return.

1 April 2025 – Changes to FBT Exemption for Hybrid Vehicles

Under the current FBT framework (pre-April 2025), Electric Vehicles attract an FBT exemption, provided the car is zero- or low-emission (fully electric, hydrogen, or plug-in hybrid), its first retail sale was after 1 July 2022, and the car is below the luxury car tax (LCT) threshold of $89,332 for fuel-efficient vehicles in 2024-25. However, from 1 April 2025, new financial commitments or modifications to existing arrangements for plug-in hybrid electric vehicles (PHEVs) won’t qualify for the FBT exemption. This means if you are an employer considering providing a PHEV as a fringe benefit, it’s important to move quickly if you want to take advantage of this exemption.

Meal & Entertainment Expenses

A common business practice, particularly around Christmas, anniversaries and the end of the financial year, is to give gifts and provide staff functions for employees in recognition of a job well done. Generally, if the entertainment was provided to staff (or associates), and cost more than $300 (inc. GST) per person, then FBT applies.  What is commonly overlooked is that benefits can also be subject to FBT even if they are below $300 in instances where they are not ‘infrequent and irregular’.

If the entertainment was provided to third parties (e.g. customers, clients, suppliers etc.), then FBT doesn’t apply – regardless of cost. For reference, gifts that constitute entertainment include: tickets to movies, plays, theatre shows etc, restaurant meals and admission tickets to an amusement centre. The key is to maintain a registry of events and a list of attendees, especially in instances where costs exceed $300 per person.

The MP+ Difference

Being FBT-compliant involves consistent and thorough record-keeping practices within your business. Establishing a process in-house for each type of benefit is imperative to maximising the use of FBT concessions and/or exemptions; as well as considering the broader aspects of FBT such as reporting, salary packaging and payroll tax exposure.  If this is something that is not already in place, then a review from one of our tax specialists is advisable.

At McKinley Plowman, we have a dedicated team of tax and accounting professionals who can help you determine any necessary FBT obligations and assist you in remaining compliant moving forward. Give us a call on 08 9325 2411 (Perth), 08 9301 2200 (Joondalup) or visit www.mckinleyplowman.com.au.

Further Reading:

https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax

written by:

Alex Tonon

Alex joined McKinley Plowman in mid-2020 as a Business Services Manager, building on her Bachelor of Commerce degree and CA qualification, as well as over fourteen years' experience in accounting and tax. Alex enjoys working alongside clients to start up and grow their businesses, looking after them all the way from business plans and structure formations, through to growing businesses and maximising value. Her clients appreciate her ability to assist them in understanding their numbers and developing a clear picture of what their business means to them.