What is FBT?
FBT is a tax paid by employers on benefits provided to employees or their associates. These benefits are usually perks that go beyond an employee's regular salary, such as using a company car or receiving other non-cash benefits.
While FBT might sound complicated, managing it properly can help your business stay compliant and may even save costs.
FBT exemption for electric cars
If your business provides employees with electric vehicles (EVs), you might be eligible for an FBT exemption. Here are the key points to know:
- The vehicle must be a zero or low-emission car, like a battery electric or hydrogen fuel cell vehicle.
- It must have been first held and used after 1 July 2022.
- Its value must be below the luxury car tax threshold for fuel-efficient vehicles ($89,332 for 2024–25).
However, plug-in hybrid vehicles will lose their FBT exemption from 1 April 2025, unless the vehicle was already exempt and there’s a legally binding commitment to continue its use.
Remember, the exemption doesn’t cover home charging stations provided by employers, so you’ll need to factor these costs separately.
Equipment for working from home
With flexible working arrangements here to stay, many employees are using equipment provided by their employers at home. Here’s what you should know about how FBT applies:
- Items like laptops and mobile phones that are primarily used for work are generally FBT-exempt.
- If your business has an annual turnover under $50 million, you can provide multiple similar items (e.g., two laptops) within a FBT year if genuinely required.
- If employees use company-provided equipment for personal reasons, FBT may apply, but this can be reduced based on the percentage of business use.
This ensures businesses can continue supporting remote work without triggering unnecessary tax obligations.
Top FBT risk areas to watch
- Mismanaging entertainment expenses
Taking a client or employee out for lunch? Be mindful of how entertainment expenses are treated under FBT rules. For example, meals provided to employees under certain thresholds and conditions might be exempt, but incorrect claims could trigger penalties. - Employee contributions
If you’re using after-tax contributions from employees to reduce the taxable value of benefits, ensure these are well-documented and meet ATO’s requirements. Errors can lead to surprise tax liabilities. - Not lodging an FBT return
If you’re providing benefits like cars, reimbursing private expenses, or offering discounts, you may need to lodge an FBT return—even if you’re a small business. Skipping it could draw unwanted attention from the ATO, so ensure you review your benefits annually.
Ways to simplify FBT record keeping
From 1 July 2024, businesses can streamline FBT record-keeping by using existing business documents that meet compliance requirements. This includes declarations for travel, relocation, or other benefits, saving time and reducing administrative stress.
For example, if your team uses company vehicles, ensure they record odometer readings on 31 March and 1 April. A quick photo and an emailed odometer reading can simplify record-keeping across the board.
Need help with FBT?
FBT can be tricky, but with the right advice, it doesn't have to be overwhelming. At LEAD Advisory Group, our goal is to make tax compliance straightforward while helping you find opportunities to save.
If you have questions about FBT exemptions, tax obligations, or risk areas, we’re here to help. Reach out to us today for expert guidance tailored to your business. By staying informed and prepared, your business can manage FBT with confidence, ensuring compliance while supporting your team.
