With the Fringe Benefits Tax (FBT) year ending on 31 March, now is the time for businesses to review their FBT obligations and ensure compliance. The ATO continues to focus on key risk areas, particularly around electric vehicle exemptions, contractor classifications, and record-keeping requirements. Whether your business provides company cars, reimburses expenses, or supplies work-from-home equipment, understanding the latest FBT rules can help avoid unnecessary tax liabilities and penalties.
Here’s what you need to know about FBT for 2025 and how the latest changes might impact your business.
FBT Exemption for Electric Cars
Employers providing electric vehicles (EVs) to employees may qualify for an FBT exemption, provided the car:
- Is zero or low emission (battery electric, hydrogen fuel cell, or plug-in hybrid).
- Was first held and used on or after 1 July 2022.
- Costs below the luxury car tax threshold ($89,332 for 2024-25).
However, plug-in hybrids will no longer be FBT-exempt from 1 April 2025, unless an existing exemption applies and a financially binding commitment was made before that date.
Even with an FBT exemption, employers must still calculate the taxable value of the benefit for reporting purposes. Employees may need to determine home electricity costs for charging to reduce the benefit’s value, with the ATO providing a shortcut rate of 4.20 cents per km (excluding plug-in hybrids). Home charging stations are not FBT-exempt.
FBT and Work-From-Home Equipment
Providing employees with work-related devices (e.g., laptops, phones) for business use is generally FBT-exempt. Businesses with a turnover under $50 million can also provide multiple similar items within a year. However, if equipment is used primarily for private purposes, FBT may apply unless a business-use percentage can be demonstrated.
FBT for Contractors: Are They Really Contractors?
The ATO is cracking down on incorrect contractor classifications. A worker may still be deemed an employee for tax and superannuation purposes, even if labeled as a contractor. Simply calling someone a contractor does not mean they won’t be treated as an employee for tax purposes.
The ATO’s risk framework considers factors like:
- Whether there is a clear, written contract.
- If both parties understand the classification and its tax implications.
- Whether the arrangement follows the contract terms in practice.
Businesses should review contractor agreements to ensure compliance and avoid potential FBT liabilities.
Reducing the FBT Record-Keeping Burden
From 1 July 2024, businesses can either continue with existing record-keeping methods or use existing business records if they meet ATO requirements. This includes declarations for travel, relocation, and other FBT-exempt benefits. Accurate records are essential, particularly for vehicle use, entertainment expenses, and employee contributions.
Key FBT Risk Areas
- Mismatched Entertainment Claims – Deducting expenses without accounting for FBT.
- Employee Contributions via Journal Entries – Must be documented properly to reduce taxable benefits.
- Non-Lodgment of FBT Returns – Many businesses may have FBT obligations without realizing it, especially if providing cars, entertainment, or reimbursing private expenses.
With FBT compliance under increased scrutiny, businesses should review their FBT obligations before 31 March to avoid penalties and ensure accurate reporting. Whether it’s properly classifying contractors, handling electric vehicle exemptions, or managing employee benefits, staying informed is key to minimizing risk and maximizing compliance.
If your business provides any form of fringe benefits, now is the time to check that your records are in order and that you’re applying the correct FBT rules for the 2025 financial year.
If you have any questions regarding the above information, please do not hesitate to contact our office to speak to one of our team.
