FBT on employee benefits.
FBT payable
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Why a 47 percent rate hits harder than it looks
Fringe benefits tax is the price an employer pays for handing staff something other than cash. The headline rate is 47 percent, matching the top marginal income tax rate plus the 2 percent Medicare levy, and the logic is deliberate. If the boss could give you a car or a gym membership tax free while a colleague on the same package took salary and paid income tax, the system would leak badly. FBT closes that gap. What trips people up is the gross-up: you are not taxed on the dollar value of the perk, you are taxed on the larger pre-tax amount it would have taken to buy that perk out of your own after-tax pay.
That is why this tool asks for the benefit type. Type 1 benefits, where the employer can claim a GST credit on the cost, gross up at 2.0802. Type 2 benefits, where no GST credit is available, gross up at 1.8868. The same $1,000 of value therefore carries a different FBT bill depending on which bucket it falls into.
A $10,000 Type 1 benefit, costed properly
Say your company provides an employee with a benefit worth $10,000 that is GST-creditable, so it is a Type 1 benefit grossed up at 2.0802. The tool multiplies the taxable value by the gross-up factor, then applies the 47 percent rate to the result.
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Read that last line slowly. A perk worth $10,000 to the employee costs the employer almost the same amount again in tax, so the true outlay is close to $19,800. Switch the dropdown to Type 2 and the grossed-up value falls to $18,868 and the FBT to $8,868, because there is no GST credit baked into the formula. The chart below shows the cash value sitting underneath the tower of grossed-up value and the resulting tax.
The electric car loophole worth knowing
The single biggest FBT planning move right now is the exempt electric vehicle. A battery electric car held under the luxury car tax threshold for fuel-efficient vehicles, provided through a novated lease, attracts no FBT at all. That turns a benefit that would normally cost thousands in gross-up tax into a genuinely cheap way to package a car. It is the reason novated leasing on EVs exploded after the 2022 exemption. Plug-in hybrids lost access to this concession from April 2025, so check the energy source before you assume a hybrid still qualifies.
One practical tip from the trenches: many small employers forget that minor benefits under $300, provided infrequently and irregularly, can be exempt. A one-off team dinner or a Christmas gift kept under that ceiling usually avoids FBT entirely. The mistake is letting those small benefits creep up or become routine, at which point the exemption falls away and the whole amount becomes reportable.
Who should run these numbers
This calculator is built for the person signing off on the cost, not just the person enjoying the perk. If you run a business and you are weighing whether to hand someone a company phone, a parking spot, or entertainment, the grossed-up figure is your real budget line. If you are an employee being offered a salary-packaged benefit, the same number tells you whether the arrangement is actually generous or whether the employer is quietly recovering the FBT from your package. Note that the FBT year runs 1 April to 31 March, out of step with the income tax year, and returns are lodged with the ATO separately.
Does the employee pay the FBT?
No. FBT is a tax on the employer, not the employee, and it does not appear on your income tax return. That said, the cost is often passed back through a salary packaging arrangement, so in practice it can come out of your total remuneration. Reportable fringe benefits over $2,000 also show on your income statement and can affect things like the Medicare levy surcharge and family payment income tests, even though they are not directly taxed in your hands.
Can the employer claim a deduction for the FBT paid?
Yes. FBT itself is deductible to the business, as is the cost of providing most benefits, which softens the blow of the 47 percent rate once company tax is taken into account. This is part of why the headline number overstates the genuine after-tax cost for a profitable company. Speak to your accountant about how the deduction interacts with your specific company tax rate.
Why are there two gross-up rates at all?
The two rates exist purely to neutralise GST. When a benefit carries a GST credit the employer effectively gets some of the cost back, so the higher 2.0802 factor restores the playing field; when there is no credit the lower 1.8868 factor applies. The result is that an employee ends up no better off receiving a benefit than they would have been taking the equivalent cash and paying for it themselves.