Fringe Benefits Tax (FBT) is a tax employers pay on certain non-salary benefits provided to employees or their associates. This guide explains what counts as a fringe benefit, how FBT is calculated, and the main categories the ATO recognises. Ideal for ANZ finance teams who need a clear, digestible overview.
Explore ProSpend’s FBT Management module
FBT is a tax employers must pay when they provide certain non-cash benefits to employees or their associates (such as family members). These benefits sit outside regular salary and wages and are assessed under dedicated ATO rules.
A fringe benefit is a non-cash advantage provided by an employer, such as a car, entertainment, loan, accommodation or reimbursed expense in addition to wages or under a salary-sacrifice arrangement. It can apply to the employee, their spouse or dependent children.
This guide is designed for CFOs, Finance Managers, Payroll teams and HR leaders across Australia and New Zealand who need clarity on FBT rules without navigating dense ATO documentation. Most teams struggle with:
FBT may apply when an employer provides:
Food, drink and recreation can count as entertainment when its purpose is social or recreational. There’s no standalone “entertainment fringe benefit” category—entertainment is classified into one of four existing benefit types, depending on context.
Occurs when an employee incurs an expense and the employer either reimburses them or pays the supplier directly. Only employee-incurred expenses qualify.
Includes:
Covers goods, real property and financial assets such as:
Anything that doesn’t fit the above categories—rights, privileges, services or facilities—often becomes a residual fringe benefit.
The employer pays FBT, not the employee.
FBT is calculated by grossing up the taxable value of benefits. This represents how much pre-tax salary an employee would need (using the highest marginal tax rate) to purchase the benefit themselves.
Providing fringe benefits is legal and often strategic—helping employers attract and retain talent—so long as FBT obligations are properly managed and reported.
Using ATO-aligned rules, an employer typically follows these steps:
Capture all non-cash benefits across AP, cards, reimbursements, allowances, vehicles and entertainment.
Assign each benefit to one of the ATO categories (vehicle, loan, property, entertainment etc.).
Apply the ATO’s valuation rules (statutory formula, operating cost method, taxable value for property, etc.).
Check for:
Use Type 1 or Type 2 gross-up rates depending on whether the employer can claim GST credits.
Maintain records for seven years and report RFBA (reportable fringe benefits amounts) on employee payment summaries when thresholds are met.
Explore: The Essential FBT Holiday Guide
Some of the most common ATO considerations include:
Always refer to current ATO guidance for organisation-specific advice.
A mid-market construction group operating across NSW and QLD provides dual-cab utes to supervisors and hosts quarterly team BBQs. Historically, the finance team tracked these benefits manually in spreadsheets, often missing distinctions between work travel, limited private use and entertainment. By centralising expenses and using proactive classification rules, they:
ProSpend includes a dedicated FBT Management module designed for Australian FBT and GST rules.
Key capabilities include:
Book a demo to see ProSpend’s FBT module in action
No. FBT is separate from income tax and is paid by employers on certain non-cash benefits.
Employees, directors, and trust beneficiaries who work in the business, along with their associates (spouses, children).
Generally no, because they are not considered employees for FBT purposes.
The amount shown on an employee’s payment summary when their reportable benefits exceed the ATO threshold.
No. Business travel meals, certain property benefits and minor benefits may be exempt.
50/50 applies FBT to half of all meal entertainment. The Actual method calculates taxable amounts based on attendee types. Read the complete guide here.
Seven years, including receipts, travel diaries and classification records.
Yes, platforms like ProSpend streamline classification, apply rules and simplify reporting.
Fringe Benefits Tax can feel complex, especially when you’re juggling multiple benefit types, exemptions and reporting obligations across AP, cards and reimbursed expenses. But with the right structure and the right tools, FBT becomes far more manageable. By understanding the main categories and applying consistent classification, your finance team can stay compliant, reduce manual effort and gain far clearer visibility throughout the FBT year.
If you want to simplify FBT even further, ProSpend’s FBT module gives you automated rules, attendee logic and accurate reporting designed specifically for Australian organisations.
Book a demo to see how ProSpend can streamline your FBT management