FBT returns, prepared by accountants who check the car logbooks

Fringe benefits tax is the tax most small business owners forget they owe. It runs on its own year, from 1 April to 31 March, it's paid by the employer not the employee, and the rate is the top marginal rate. A twin-cab ute parked at an employee's house, a novated lease, a Christmas lunch, a car park: each can create a bill, and each has a way to reduce or remove it if you set it up properly.

Here's how FBT works for a small employer, what we do, and when you don't need us.

What is FBT, and who has to lodge an FBT return?

FBT is a tax on non-cash benefits that an employer provides to employees, or to their family members, because of their employment. The employer pays it, at 47% on the grossed-up taxable value, for the FBT year ending 31 March 2027.

You must lodge an FBT return if you have an FBT liability for the year, or if you paid FBT instalments on your activity statements during the year. If you're registered for FBT but have nothing to report, lodge a notice of non-lodgment instead, so the ATO doesn't chase a return later.

"Employee" includes you if you're a director paid by your own company, or a beneficiary employed by your family trust. That's why owners of companies and trusts get caught most often. A sole trader or partner can't be their own employee, so FBT doesn't apply to their own car.

When is the FBT return due?

If a due date falls on a weekend or public holiday, you can lodge and pay on the next business day. To get the 25 June date for the 2027 return, your tax agent must have you on its FBT client list by 21 May 2027, so talk to us before then.

If your FBT for a year is $3,000 or more, the ATO puts you into quarterly FBT instalments on your activity statements the following year. Your FBT return won't be processed until every activity statement for the year, including March, is lodged.

What creates an FBT bill for most small businesses?

Almost every small employer's FBT comes from the same handful of benefits. This is the table we work through in our first conversation.

Our fringe benefits tax agent works through each benefit with the current year's rates, exemptions and valuation options. Your accountant reviews the workings and decides with you which method to use. Nothing goes to the ATO without that review.

How is FBT on a car worked out?

There are two methods. You can use whichever gives the lower figure, if you have the records to support it.

• Statutory formula method. Taxable value is 20% of the car's base value (broadly its cost including GST, but not registration or stamp duty), adjusted for the days it was available for private use, less any employee contributions. After the business has held the car for four full FBT years, the base value drops by a third.
• Operating cost method. Taxable value is the car's total running costs (fuel, insurance, registration, repairs, plus deemed depreciation and interest) multiplied by the private-use percentage from a valid logbook, less employee contributions. This only works with a 12-week logbook and odometer records.

Worked example: one petrol car, two choices

Example: Say your company buys a $50,000 car (including GST) and lets the operations manager take it home every night for the full 2027 FBT year. The company can claim the GST.

The contribution route (often called the employee contribution method) is how many novated leases and salary packages are set up. It isn't free: the employee pays the contribution from after-tax pay, and the employer must include it as income and account for GST on it. Whether it's worth doing depends on the employee's tax rate and how much they drive privately. If their logbook shows 80% business use, the operating cost method may produce a far lower bill without any contribution at all.

That's the kind of comparison we do for every car. Our guide to FBT on cars and electric vehicles goes through the methods in more detail.

How does the electric car exemption work, and is it changing?

A car benefit is exempt from FBT if the car is an eligible zero-emissions car, which in practice means a battery electric or hydrogen fuel cell car, that was first held and used on or after 1 July 2022, and luxury car tax has never been payable on it. Associated costs such as registration, insurance, repairs and charging are exempt too. The exemption covers cars provided under salary packaging arrangements, which is why EV novated leases are popular.

Three things trip people up:

1. Plug-in hybrids no longer qualify from 1 April 2025, apart from narrow transitional cases where a binding commitment existed before then.
2. It's still reportable. The exempt benefit's value goes on the employee's income statement through Single Touch Payroll and counts toward income tests such as HELP repayments and the Medicare levy surcharge.
3. It only works for employees. A sole trader can't use it on their own car.

The exemption is under review. The government has announced a phase-down of the exemption for some electric cars from 1 April 2027, and Treasury has released exposure draft legislation (no Bill had been introduced at the time of writing). It is not law. We advise on the law as it stands and model the proposal for anyone signing a new lease, because the draft includes protection for commitments made before the change.

How is entertainment treated for FBT?

Entertainment is where small employers most often get both FBT and income tax wrong, because the two systems are linked.

• Actual method. You work out who ate what: food and drink for employees and their associates is subject to FBT (and then deductible); for clients it's outside FBT and not deductible.
• 50/50 split method. Half of all your meal entertainment spending is taxable for FBT and half is deductible. Simple, but it can overtax a business that mostly entertains clients.
• 12-week register method. Keep a detailed register for 12 continuous weeks; the percentage it shows for employees then applies to the year's spending.
• Minor benefit exemption. Small, infrequent benefits valued under $300 per person, such as a modest Christmas lunch off-site, can be exempt. But if it's exempt from FBT, it's generally not deductible either.
• Food and drink on your premises on a working day for employees is often exempt.

The right method depends on how your business entertains. A busy agency taking clients to lunch weekly needs a different answer from a building company with one end-of-year barbecue. We look at the year's spending, try the methods, and pick the one that gives the lowest combined FBT and income tax.

How does an FBT engagement with BPAG work?

1. Free conversation in March. Before the FBT year ends, we ask about cars, entertainment, salary packaging, loans and anything unusual. For a lot of businesses, this is where we confirm you don't need to lodge, and we tell you so.
2. Collect the records. Odometer readings at 31 March, logbooks, novated lease statements, employee contribution totals, and the entertainment ledger. We send a short request by SMS or email; your team answers on their phones and uploads photos.
3. Calculate. Our FBT agent drafts the workings for each benefit using the current rates. Your accountant reviews them, tests the alternative methods, and checks how each figure ties to your general ledger.
4. Tell you the number before we lodge. You'll see the FBT payable, the reportable amounts per employee, and anything we'd change for next year.
5. Lodge by 25 June. We lodge electronically and you pay the ATO by the same date.
6. Fix next year. If a logbook, a contribution arrangement or a different car would cut next year's bill, we put it in writing. Our tax planning work picks this up each year.

The agents draft; qualified accountants review and sign off. Every figure is traceable back to the transaction or document behind it, and your data stays in Australia.

What does an FBT return cost?

FBT returns are quoted as a fixed fee once we know how many benefits and employees are involved. A business with one car and a Christmas party is a small job; a business with a fleet and salary packaging for twenty staff is a bigger one. You'll know the fee before we start. Our ongoing plans and what they include are on our pricing page.

When you might not need us: if you have no cars available for private use, no salary packaging and only occasional, modest staff functions, you may have no FBT at all. Ask us once, in March, and we'll confirm it. If you're registered for FBT but have nothing to report, the notice of non-lodgment takes a few minutes.

What mistakes do we see with FBT?

• No 31 March odometer readings, which forces the statutory method even when a logbook would have cost less.
• Utes assumed to be exempt when they're used for weekend trips, family holidays or the school run.
• A director's company car never reported, because "it's my company". If you're paid as an employee of your company, FBT applies.
• Employee contributions taken through payroll as a pre-tax deduction. For the employee contribution method to reduce FBT, contributions must come from after-tax pay.
• Plug-in hybrids treated as exempt after 1 April 2025.
• Entertainment claimed as a deduction and treated as exempt from FBT at the same time.
• Reportable amounts missed from Single Touch Payroll, which flows through to employees' HELP and Medicare levy surcharge calculations.

What should you send us?

• A list of vehicles the business owns or leases, with purchase price or lease details, and who uses each one
• Odometer readings at 1 April and 31 March, and any logbooks
• Novated lease statements and the total of any employee contributions
• The year's entertainment, staff functions and gift spending (your general ledger is usually enough)
• Car parking arrangements, if you provide parking near a commercial car park
• Any loans to employees, and any private bills the business paid
• Last year's FBT return and activity statements showing FBT instalments

If your payroll runs through us, much of this is already in your file. Our payroll and Payday Super service handles the reporting of fringe benefit amounts through Single Touch Payroll.

General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.