Is Your Business Ready for FBT Year End? Here's What to Know Before 31 March 2026
The Fringe Benefits Tax year ends on 31 March 2026, and it has a habit of arriving before people feel ready. Unlike your income tax return, FBT runs on its own calendar, from 1 April to 31 March, which means the window closes well before you are sitting down to review the rest of your finances. A little attention now saves a lot of scrambling later.
If your business provides non-cash benefits to employees, directors, or their associates, here is what you need to be across this year.
What is FBT, and who does it apply to?
Fringe Benefits Tax is levied on non-cash benefits provided to employees or their associates, including company directors and shareholders. It sits entirely separate from income tax and is charged at a flat rate of 47%. There are 13 benefit categories in total, covering everything from company cars and novated leases to gym memberships, health insurance, meal entertainment, gifts, school fees, and car parking near the workplace.
The ATO has identified a $1 billion compliance gap in FBT collections, a 22% shortfall, and it is actively working to close it. Its data matching programs pull from vehicle registries, toll records, and immigration records to identify discrepancies between what businesses declare and what is actually happening. This is not a tax to set and forget.
Company cars: where most of the risk sits
Motor vehicles are the most common fringe benefit and the ATO's most scrutinised area. A car is considered available for private use as soon as it is parked at an employee's home overnight, even if it is primarily used for work. That includes your own home if you are a director.
There are two ways to calculate your FBT liability on vehicles.
The Statutory Method applies a flat 20% rate to the GST-inclusive base value of the car. For a vehicle valued at $40,000, the FBT payable would be $7,821.55 ($40,000 x 20% x 2.0802 x 47%). This method is straightforward but can be costly if the car is used heavily for business.
The Operating Cost Method bases FBT on the actual running costs of the vehicle multiplied by the private use percentage, established through a valid 12-week logbook. If the operating costs for the year were $10,000 and private use was 40%, the FBT payable would be $3,910.78 ($10,000 x 40% x 2.0802 x 47%). Where business use is high, this method often produces a meaningfully lower result.
Logbooks must cover a continuous 12-week representative period and be renewed every five years, or when usage patterns change. Without a valid logbook, the statutory method applies by default. Employee contributions towards vehicle running costs reduce the taxable value under either method, and FBT payable is tax-deductible for the employer.
A couple of things that catch people out: dual-cab utes are not automatically exempt, and neither are vehicles with company signage. The same private use rules apply regardless.
Electric vehicles and the PHEV change
Pure battery electric vehicles and hydrogen fuel cell vehicles below the luxury car tax threshold remain exempt from FBT in 2025-26, making them genuinely attractive for salary packaging arrangements. From 1 April 2025, however, plug-in hybrid electric vehicles (PHEVs) lost that exemption. Transitional arrangements may apply if a PHEV was already in use before that date, but if you are reviewing your fleet or salary packaging, only a pure electric vehicle retains the benefit going forward.
Staff functions and gifts: usually straightforward
End of year celebrations and team gifts are generally exempt from FBT when the cost is under $300 per person. Recreational activities like a team lunch or golf day follow the same threshold. Gifts that are infrequent and under $300 per person are also typically exempt. Benefits provided to clients rather than employees are not subject to FBT at all.
The $300 threshold applies per benefit, per person, so if a gift and a dinner are provided to the same employee in the same period, both may be assessed together. Good record keeping, who attended, what was provided, and the cost per person, means you can claim exemptions with confidence.
Why lodging matters even when you owe nothing
Not lodging an FBT return leaves the ATO with an unlimited window to audit your records and raise assessments. Lodge a nil return, and that period is capped. It is a simple step that draws a clear line around your exposure.
Other risks of non-compliance include accumulating liabilities that grow undetected, and failing to report Reportable Fringe Benefit Amounts on employee payment summaries, which can affect their Medicare levy surcharge, child support calculations, and other income-tested obligations.
Key dates for 2025-26
FBT year ends: 31 March 2026
Paper lodgement and payment due: 21 May 2026
Electronic lodgement via registered tax agent: 25 June 2026
To benefit from the extended June deadline, you need to be registered with us as your tax agent before 21 May.
The bigger picture
FBT is worth understanding not just for compliance but for the planning opportunities it opens up. How benefits are structured, how you pay yourself, and how your business and personal finances work together all affect your overall tax position. This time of year is a genuinely useful prompt to look at the full picture.
If you would like to talk through your situation before 31 March, reach out. We are always happy to help you find the opportunities in the numbers.