Australia 2026 fringe benefits tax return guide.

This guide provides an overview of Australian fringe benefits tax (FBT) for the FBT year ending 31 March 2026, including common benefit types and typical record-keeping requirements.

Use this document as a practical checklist to help identify benefits provided to employees (and, where relevant, contractors) and to understand what information is commonly required to prepare an FBT return.

What is new in 2026?

• Plug-in hybrid electric vehicles to no longer be FBT exempt for new commitments from 1 April 2025
• FBT potentially applicable on benefits provided to contractors

Types of benefits

Assessable benefits generally include all expenses paid on behalf of an employee, or property or goods and/or services provided to an employee free of charge or at a discount. This definition is very broad and should be considered carefully. The most common benefits provided to employees are detailed below.

1. Motor vehicles

For FBT purposes, a motor vehicle is a car if it is a vehicle designed to carry a load of less than one tonne and fewer than nine passengers.

An FBT liability arises if an employer’s car is available for private use by an employee. A vehicle is deemed to be “available for private use” if it is garaged at or near the employee’s home (or the home of the employee’s associate, e.g. a relative).

Where the business premises are also the employee’s home, the Australian Taxation Office (ATO) may deem the vehicle to be available for private use. Employers should ensure that valid log books, odometer records and other motor vehicle records are maintained to ensure the correct private use proportion is recorded and applied to the FBT return.

There are two methods for assessing liability in relation to cars:

Statutory method

The fringe benefit provided is calculated as a percentage of the cost of the car. The percentage set by the ATO is 20%, if the car was acquired after 1 April 2014. If you have held the vehicle for more than four years the cost of the car may be reduced by one third.

No log book or substantiation documentation is required when using this method.

Operating cost method

The fringe benefit is calculated as a percentage of the total operating costs of the car.

A log book is required to be kept for a 12-week continuous, representative period during the past 5 years. During the period in which a log book is maintained, an entry must be made to record each business journey of the car concerned. Private journeys do not have to be recorded. For more information in relation to log books please refer to section 4.A. Documentary evidence of expenditure must be maintained.

The retention of a logbook is essential to substantiate non-taxable benefits when using the operating cost method. Where the logbook does not meet the substantiation requirements there will be no allowance for business kilometres. Note however, this does not prevent employers from still choosing the operating cost method although business use % will be nil.

Odometer readings must be recorded as of 1 April 2025 or when the employer first holds the car, (i.e. where it is acquired during the 2026 FBT year), and on 31 March 2026 or at the time the car ceased to be held by the employer.

Declarations must be obtained for any employee contributions towards running costs.

FBT exemption for eligible electric vehicles

The Government has amended the law that provides an FBT exemption for eligible electric vehicles. A car benefit is an exempt benefit if all the following requirements are satisfied:

1. The car benefit is provided in the year of tax in respect of the employment of a current employee
2. The car benefit was provided on or after 1 July 2022
3. The car is both held and used on or after 1 July 2022
4. The car is a ‘zero or low emissions vehicle’ when the benefit is provided
5. Luxury car tax has never been payable on the importation or sale of the car (Note practical issues for acquiring a second-hand car)
6. The luxury car tax threshold is AUD 91,387 for the 2025 – 2026 financial year

Please note that although the FBT exemption for electric vehicles will remain, the exemption for plug-in hybrid vehicles on the other hand have ceased from 1 April 2025 for a new commitment or if there was a change to pre-existing commitment.

The ATO has published guidance on a shortcut method to calculate the electricity costs in relation to charging an electric vehicle at residential premises. The calculation is based off the total kilometres travelled in FBT year multiplied by 4.2 cents. Note this shortcut method does not apply to plug-in hybrid electric vehicles.

In addition, please note the following:

• Employers may elect to use either method for any or all of their cars, regardless of which method was used in a previous year.
• An election must be made in writing if changing from statutory method to operating cost method.
• Vehicles used for only part of the year require proportional calculations and need the details to be shown separately.
• Vehicles designed to carry a load of one tonne or more, or nine or more passengers are residual benefits and subject to different calculations.

Novated leases

Novated leases will not be considered a bona fide lease for FBT purposes where an employee trades-in a vehicle or makes a cash contribution that reduces the underlying finance amount under the lease agreement. In these circumstances, the provision of the car is a property or residual benefit rather than a car fringe benefit.

2. Loan fringe benefits

A fringe benefit is provided when an employee is provided with a loan and the rate of interest on the loan is less than the statutory rate of interest set each year by the ATO. For the year ending 31 March 2026, the statutory interest rate is 8.62%.

The amount of an employee debt that an employer does not enforce on an employee when the payment becomes due is also deemed to be a loan fringe benefit.

3. Expense payments

The payment of an employee’s private expenses is a fringe benefit and may include any of the following private expenditure:

• Telephone and/or home internet
• Motor vehicles
• School fees
• Club fees
• Travelling
• Leisure facilities
• Any other private expenditure

4. Housing

Unless one of the various exemptions apply, the payment of accommodation provided to an employee as their usual place of residence is a fringe benefit.

5. Living-away-from-home-allowances

Payments to employees and their families to cover additional costs while living away from their usual place of residence are also known as a Living-away-from-home allowance. To be eligible for concessional FBT treatment the employee will need to maintain a home in Australia, (at which they usually reside), for their immediate use and enjoyment at all times while living away from home for their work.

6. Property

The provision to the employee of goods produced, manufactured or sold by the employer for free or at a discounted price is considered to be a fringe benefit. If the benefit provided is less than AUD 300 and infrequent an FBT exemption may apply.

7. Debt waiver

The release of an employee from an obligation to repay debt is a fringe benefit. This can include overpaid salaries which employees do not repay and is not included in their salaries and wages.

8. Board

A fringe benefit arises when an employee is provided with accommodation together with meals, e.g. accommodation and meals for farm hands unless exemptions such as zone rebates apply.

9. Residual (other) benefits

Any other benefit not specifically captured above e.g. where an employer provides an employee with use of office equipment while the employee works from home, is a residual fringe benefit. For more information in relation to working from home, please refer to section 2.

10. Car parking

FBT will be payable by certain employers where the employer provides car parking facilities on or ‘in the vicinity of’ business premises, either free of charge or at a reduced cost to an employee, unless the benefit is exempt under the small business exemption.

Employers other than government bodies, public companies and their subsidiaries will be eligible for an exemption from car parking Fringe Benefits Tax if:

• The car is not parked at a commercial parking station
• One of the following is satisfied for the year ended 30 June 2024 (income year ending most recently before the start of the FBT year):
  • The gross income of the business is less than AUD 10 million
  • The employer would be a small business entity if the aggregated turnover test was less than AUD 50 million

The ATO have changed their definition of a ‘commercial parking station’ which now includes parking facilities at shopping centres, hospitals and other similar facilities that provide all-day parking to the public for a fee.

Please note parking paid to a commercial car parking station will usually be subject to FBT. Metered street parking does not constitute a commercial parking station.

Where the lowest fee charged to the public on the first (business) day of the 2026 FBT year, (i.e. 1 April 2025), for all day parking by any commercial car parking station within a one-kilometre radius of the premises on which the car is parked was more than AUD 11.03, a car parking fringe benefit will generally arise.

11. Meal entertainment

The provision of food or drink, and also accommodation or travel in connection with, or for the purpose of, facilitating entertainment is considered to be a fringe benefit. Please note, only entertainment provided to employees and their associates is assessable. The provision of entertainment to clients is not assessable for FBT purposes, but is not deductible for income tax purposes and the GST input tax credits cannot be claimed.

Where an employer has incurred non-refundable expenditure in relation to a cancelled staff event, an FBT liability should generally not arise. An exception to this rule is where an employer reimburses an employee for attendance fees with respect to a cancelled staff event.

Staff sustenance is not meal entertainment. Consideration should be given to where certain staff sustenance and/or meal entertainment expenses are allocated in your management accounts to assist identifying and tracking FBT related expenses. We have attached a table summarising the treatment of the various types of meal entertainment. If you require assistance determining whether food and drink provided in a given circumstance constitutes meal entertainment, please contact our office.

12. Other entertainment

Other entertainment provided to an employee, such as expenditure which could be described as amusement or recreation, including providing tickets or vouchers for sporting events, theatre, movies, exhibitions, providing packaged holidays, leasing a corporate box, hiring a boat or plane, is also considered to be a fringe benefit.

Working from home (WFH)

Equipment provided by employers to employees to allow them to work from home or another location may result in an FBT liability where an exemption does not otherwise apply.

Examples of equipment employers may provide to their employees include desks, chairs, external monitors, computer accessories (mouse, keyboard, headphones), stationery or laptop computers.

Subject to exemptions for laptop computers, if an employer provides an employee with the use of equipment to support the employee to work from home, an FBT liability can arise where the items are used by the employee for private purposes or where the employee becomes the owner of the equipment.

An FBT liability may also arise where employers reimburse their employees for expenses associated with working from home e.g. home internet or home phone (usage) costs. Where an employer reimburses an employee for home internet or home phone costs that exceed AUD 50 for an FBT year, the employer is required to obtain and keep records of the actual expenses incurred by the employee. This includes, but is not limited to, receipts, a four-week representative diary determining the employee’s work-related usage, and an employee declaration.

Impact of the goods and services tax (“GST”)

Benefits provided to employees will generally be based on the GST inclusive value.

“Type 1” benefits are those provided that contain a GST amount claimable by the employer or other third party providing the benefit (e.g. car leases, meal entertainment etc.). The benefit will be “Type 1” as long as the employer has an entitlement to claim a GST input tax credit, even where the employer does not hold a valid tax invoice, or the employer has chosen not to claim a GST input tax credit. The type 1 gross-up rate is 2.0802.

“Type 2” benefits are those benefits provided that do not contain a GST amount (e.g. residential rents, school fees, health insurance and certain car fringe benefits). The type 2 gross-up rate is 1.8868.

When compiling details of benefits provided please ensure the figures you provide us are GST inclusive or advise the amount of GST paid. This will probably entail additional work as most accounting systems separate the GST into a GST control account.

In addition, employee contributions towards fringe benefits that include a GST component will be treated as a “taxable supply”, and GST of 1/11th will be payable by the employer. This “supply” will need to be included in the relevant Business Activity Statement following receipt of the contribution, at both Labels G1 and T1.

Employee versus contractor

It should be noted that for FBT purposes, the term “employee” takes its common law meaning. Consideration should be given to any fringe benefits provided to contractors as FBT may be apply should the ATO view the contractor as a common law employee. Should you have any doubts as to how your contractors are treated, please contact your Bedford advisor.

Minor and infrequent

A common FBT exemption rule is the “Minor & Infrequent” exemption, which requires the benefit provided to have been under AUD 300 (GST-included) and similar and/or identical benefits to have occurred infrequently throughout the FBT year.

However, consideration should be given to the regularity of providing similar and/or identical benefits in an FBT year, as the ATO does not specifically define “infrequent”. Should you have any doubts about the regularity of fringe benefits your business has provided, please contact your Acclime advisor.

Nil lodgement

Your business may not have provided a fringe benefit or may be entirely exempt from fringe benefits due to the various exemptions. Although this would result in no lodgement of an FBT return, consideration should be made to lodging a nil FBT return to reduce exposure of risk to an ATO initiated audit outside the ATO amendment periods. Should you have any doubts about lodging a nil FBT return, please contact your Bedford advisor.

Assessment and records

Employers are required to self-assess their liability to pay FBT and may be subject to an audit by the ATO. Should an officer of the ATO approach your company with respect to an FBT audit, you should contact this office prior to any discussions with the ATO.

Log books

Each entry must contain the following particulars:

• A detailed description of the purpose(s) of the journey
• The date on which the journey began and the date on which it ended
• The odometer reading at the beginning of the journey and the reading at the end
• The number of kilometres travelled by the car during the journey

It is important the log book records the odometer readings from the commencement to the completion of the 12-week period.

A new log book will be required to be kept every five years or if usage varies by more than 10%. All taxpayers using a log book should review the commencement date and complete a new log book as they approach five years.

The minimum 12-week log book period can straddle two FBT years and the 12-week logbook can be used for both of those FBT years when estimating the business use percentage, provided at least one day of the 12-week log book relates to the 2025 FBT year.

Travel from home to work is private use, except where travel from home to work is incidental to use of the vehicle for business, (e.g. employee required to travel to or from home directly to customer’s premises, not to employer’s workplace first). Note that the ATO considers a diversion of 2 kilometres or less is minor and infrequent private use.

An employee should remember that trips undertaken in an employer provided car are considered private if the log book entry does not contain relevant information, (e.g. “business” or “general business” is not sufficiently descriptive information).

Where a new vehicle has been acquired, an employer may elect to apply the log book of the previous vehicle.

During the non-logbook year, the employer must estimate the number of business kilometres travelled by the car during the period.

It is imperative that detailed records such as travel diaries, logbooks and employee declarations are maintained as required to support the figures in the FBT Return. If the records cannot be produced at an audit, FBT will be levied on the total expense incurred by the employer (and penalties will apply for any reductions in FBT previously claimed).

False employee declarations may result in additional taxes and penalties.

Where employee declarations are relied upon to support the FBT Return, the employer remains liable for consequences arising from false declarations. It is the employer’s obligation to ensure the declarations are accurate.

Single touch payroll

The total grossed-up taxable value of certain fringe benefits must be allocated in full to the recipient employee and reported through Single Touch Payroll where the sum of the pre-grossed-up value of those benefits exceeds AUD 2,000.

“Excluded” benefits include meal entertainment and entertainment facility leasing expenses (EFLEs) not under salary packaging arrangements, car parking, remote area benefits, security related benefits and expenses for pooled or shared cars.

The correct allocation of reportable fringe benefits to employees is crucial as fringe benefits may affect employee access to Government entitlements such as the family tax benefit, Medicare levy surcharge, certain rebates for superannuation contributions, superannuation and termination payments surcharge etc.

If an employer provides PAYG Payment Summaries which include reportable fringe benefits amounts, any mistake may require you to reissue ALL PAYG Payment Summaries to employees with fringe benefits.

Failing to correctly report employee’s reportable fringe benefits on the employee’s PAYG Payment Summary or Single Touch Payroll could result in a penalty of AUD 4,200 for each incorrect reported benefit. More severe penalties apply for intentionally making a false and misleading statement.

FBT rate

The FBT rate of tax for the year ending 31 March 2026 is 47% (i.e. highest marginal tax rate + Medicare levy) and is payable by the employer, not the employee.

Employers should exercise care when providing taxable fringe benefits to employees earning less than AUD 190,000 per annum as it may result in paying a higher rate of tax than necessary.

Next steps

The key deadline for the 2026 FBT year is 28 April 2026 for submitting information to our office (for our clients), with FBT liabilities due for payment by 25 June 2026.

Use this guide to identify benefits provided during the year, gather the relevant records and confirm whether any exemptions apply. If you are unsure whether a benefit is assessable, whether your records meet substantiation requirements, or whether a nil return is appropriate for your business, contact your Acclime advisor before the submission deadline.