A complete FBT guide for accountants: Advising clients with confidence

Most business clients have no idea they have an FBT problem. They garage a work ute at home, reimburse a director's phone bill, shout the team a Christmas lunch, and never connect any of it to fringe benefits tax. They rely on their accountant to spot it.  

The stakes are rising: the ATO's most recent estimate puts the net FBT gap at $1.8 billion, or 30.4% of expected revenue, and the regulator attributes the growing amount of unreported FBT to small- and medium-sized (SME) employers. 

This FBT guide for accountants covers how to identify exposure across your client base, calculate and lodge correctly, apply every available exemption, and turn an avoided compliance task into a priced advisory service.

Key takeaways 

• Your clients rarely self-identify FBT exposure. Company cars available for private use, expense reimbursements, entertainment and staff loans are the common triggers you need to flag. 
• FBT is charged at 47% on the grossed-up taxable value of benefits, using a Type 1 rate of 2.0802 or a Type 2 rate of 1.8868. It is separate from income tax and paid by the employer. 
• The deadline is 25 June when you lodge electronically as their tax agent, but only if the client is on your FBT client list before 21 May. 
• Lodging a nil FBT return caps the ATO's amendment window at three years. Not lodging leaves your client exposed indefinitely. 
• FBT is an advisory and billing opportunity, not just compliance. A standardised annual review across your client base protects clients and grows fee revenue. 

FBT is the tax your clients are least equipped to spot, and the one the ATO is increasingly equipped to find. That mismatch is why it belongs on your radar before it lands on theirs. 

• Clients rarely flag it themselves. They treat a car or a staff lunch as an operating cost, not a taxable benefit, so the exposure surfaces only when you go looking for it. 
• The ATO is actively hunting the gap. The regulator attributes most of its FBT gap to SMEs who provide motor vehicle benefits without registering, and it matches vehicle registrations against companies and trusts, treating a car as available for private use whenever it is garaged at or near an employee's home. 
• An unlodged year never closes. Without a lodged return, an audit can reach back across every year the benefit was provided. 
• A nil return is cheap protection. Lodging a nil FBT return starts a three-year amendment clock (six years where tax has been avoided, with no limit for fraud or evasion). A Notice of Non-Lodgement (NAT 3094) does not, because it does not raise an assessment. Only a lodged return does. 
• For the practice, it is a billing opportunity. A defensible FBT review is something you can price and repeat across the client base every year, not just a compliance task to absorb. 

Get FBT wrong, and the cost falls on both sides: the client pays penalties and interest, while the practice bears the professional risk. Get it right proactively, and FBT becomes a defensible review you can price and repeat every year. 

Note: The 2026/27 Budget proposal, which was released in May, suggested some FBT-related changes. Refer to our Practitioner's Handbook to guide your planning for the next 12 months. Check back in after the Budget is approved for updated guidance! 

Fringe benefits tax is a tax your client pays as an employer on certain non-cash benefits provided to their employees or the employees' associates, such as a spouse.  

It is separate from income tax. It is calculated on the grossed-up taxable value of the benefits at 47% and is paid by the employer rather than the employee. The FBT year runs from 1 April to 31 March, which is different from the income tax year. 

Client communication tip: the line that lands with clients is that the ATO taxes non-cash perks roughly as if they had been paid as salary. That framing usually explains both why the tax exists and why the grossed-up value exceeds the cost of the benefit. 

Exposure is more widespread than most clients assume.  

The common triggers for FBT exposure include:  

• A company car available for an employee's private use. 
• Paying or reimbursing an employee's private expenses. 
• Providing entertainment such as meals and events. 
• Offering low-interest or interest-free loans to staff. 
• Running salary packaging arrangements. 

Any one of these can create a liability even where the client sees it as a normal cost of doing business. 

You will usually find FBT in the books before the client mentions it.  

Red flags to scan for FBT exposure: 

• Motor vehicles registered in the company name, which the ATO actively data-matches. 
• Entertainment and meal expenses sitting in the general ledger. 
• Director loan accounts, which can signal both FBT and Division 7A issues. 
• Expense reimbursements that look personal rather than business. 

You should build these checks into your annual client questionnaire so that exposure is caught at the same time each year rather than discovered during an audit. 

Not every client has a liability. The ATO outlines ways to reduce FBT liability that can be applied to different clients.  

• Clients providing only exempt benefits may have nothing to pay.  
• Not-for-profit clients that are registered public benevolent institutions or health promotion charities are exempt up to a capping threshold (generally $30,000 of grossed-up value, with a separate $5,000 cap on salary-packaged meal entertainment), and rebatable employers receive a partial rebate.  
• Clients whose aggregate benefits fall under the record-keeping exemption threshold can also use a simplified approach. 

1. Car fringe benefits 

This is the most common one you’ll come across. A car fringe benefit arises when a company car is available for an employee's private use, including simply being garaged at the employee's home.  

There are two valuation methods: 

• Statutory formula method: a flat 20% of the car's base value 
• Operating cost method: based on actual costs and the business-use percentage from a logbook.  

You can elect the method that produces the lower liability per car, per year. A car escapes FBT only where it is genuinely never available for private use, which needs a documented policy and a compliant logbook to support. 

2. Expense payment fringe benefits 

These arise when your client pays or reimburses an employee's private expenses, such as a personal phone bill, school fees or private travel. 

3. Entertainment fringe benefits 

Meals, events and hospitality. The rules are detailed, and the valuation method matters, but minor and infrequent entertainment may be exempt under the minor benefits rule. 

4. Loan and debt waiver fringe benefits 

Low-interest or interest-free loans to employees and waived debts can both create benefits. Director loan accounts are the usual culprit and deserve a close look. 

5. Housing and living-away-from-home (LAFHA) 

Accommodation provided to employees and living-away-from-home allowances are benefits in their own right, subject to specific conditions and declarations. 

The ATO provides FBT rates and thresholds, some of which are indexed annually. Make sure to confirm current-year figures before providing client advice. 

Client communication tip:  

• Type 1 gross-up rate is the one to explain when a client asks why a GST-creditable benefit still costs them more than the invoice value. 
• Eligible clients whose aggregate fringe benefits fall under the record-keeping exemption threshold can rely on a base year's records rather than maintaining full records every year, which is a genuine time-saving worth flagging. 
• Employers may not know that RFBA feeds into employees’ income tests for Medicare levy surcharges, HELP repayments, child support, and family assistance. It should be noted to your client. 

This is where good advice saves clients real money. Treat the items below as the canonical list to work through every year. 

Heads-up for FY27 planning 

The 2026 Federal Budget announced a phased wind-back of the EV exemption (subject to the legislation passing). From 1 April 2027, EVs priced between $75,000 and the LCT threshold are slated to receive a 25% FBT discount rather than the full exemption, while EVs under $75,000 keep the full exemption until 1 April 2029.  

Client communication tip: Flag the EV FBT exemption to clients weighing up an EV arrangement now, as the timing of the commitment will affect the outcome.

1. Identify all fringe benefits the client provided across the FBT year, from 1 April to 31 March. 
2. Determine the taxable value of each benefit using the correct valuation method, then reduce it by any employee contributions. 
3. Apply the correct gross-up rate: (Type 1 at 2.0802 for GST-creditable benefits, Type 2 at 1.8868 for the rest). 
4. Calculate the FBT payable: multiply the total grossed-up taxable value by 47%. 
5. Account for employee contributions and exemptions so the final taxable value reflects everything that legitimately reduces it. 

Example of FBT calculation 

A client provides an employee with a car that has a taxable value of $10,000, all GST-creditable (Type 1).  

• Grossed up, that is $10,000 × 2.0802 = $20,802. 
• FBT payable is $20,802 × 47% = $9,776.94. 

If the employee makes an after-tax contribution of $2,000, the taxable value falls to $8,000, the grossed-up value to $16,641.60, and the FBT to $7,821.55, a saving of $1,955.39.  

Use the contribution lever deliberately when you advise.

Registering clients for FBT 

As your client’s tax agent, you can register them for fringe benefits via: 

• ATO online services 
• Phone 
• Mail 

Registration requires an Australian Business Number (ABN).

Lodgement deadlines 

Keep in mind the following FBT lodgement deadlines: 

• General: 21 May following the end of the FBT year 
• Tax agents: 25 June 

The extended deadline only applies if your client is added to your FBT client list on the ATO lodgement program before 21 May.  

Client communication tip: Late additions will cost your client the extension. Also, payments are due on the same day of lodgement. Make sure to bring these up early, and that payment is ready.  

Quarterly instalments 

Clients with FBT liabilities of $3,000 or more must pay FBT in quarterly instalments through their activity statements the following year. The balance is reconciled on the annual return.  

Record-keeping requirements 

Clients must keep clear records supporting their FBT position. This includes:  

• Logbooks 
• Declarations 
• Evidence of employee contributions 

Logbooks remain valid for five years, provided the pattern of use does not materially change.  

Client communication tip: Coach your clients on proper record-keeping so they know what makes a reduced taxable value defensible if the ATO asks. 

Reducing FBT is straightforward advice once the exposure is mapped.  

Levers to apply: 

• Employee contributions. A post-tax contribution from the employee directly reduces the taxable value, as covered above. 
• Salary packaging exempt items. Package items that are FBT-exempt, such as eligible work devices, additional superannuation and eligible electric vehicles. 
• Applying every available exemption. Work through the exemptions list above each year rather than relying on memory. 
• Accurate records. Logbooks and declarations are what let you stand behind a reduced value, so coach clients to keep them as they go. 

The practices that do this well do not reinvent the analysis for each client. They run a standardised annual FBT review across the whole client base, which is both a better risk management and a repeatable service line.  

A purpose-built system such as ChangeGPS’s FBT is one way to make that consistency practical at scale. 

For practices that want to offer FBT as a genuine service rather than a reluctant compliance task, ChangeGPS' FBT module, as part of the Year End Bundle, is built around the adviser workflow. It is a complete practice system, not just a calculator.  

For practices that want to offer FBT as a genuine service rather than a reluctant compliance task, ChangeGPS FBT is built around the client advice workflow.  

When prepared manually, an FBT return takes hours and yields thin margins, which is why so many firms avoid the work. Run as a structured service, FBT can be priced from $500 to $2,000 or more per return, with the advice report justifying the fee.  

When is the FBT return due? 

FBT returns and payments are due by 21 May after the FBT year ends on 31 March. If you lodge electronically as the client's registered tax agent, the deadline extends to 25 June, but only if the client is on your FBT client list on the ATO lodgement program before 21 May. Add clients early so they do not lose the extension. 

Are electric vehicles exempt from FBT? 

Eligible battery electric and hydrogen fuel-cell cars first held and used on or after 1 July 2022 can be fully exempt, provided their value is below the fuel-efficient luxury car tax threshold. Plug-in hybrids lost eligibility for new arrangements from 1 April 2025. Note that the 2026 Federal Budget announced a phased reduction of the exemption from 1 April 2027, so check arrangement dates carefully. 

What is a reportable fringe benefits amount (RFBA)? 

When an employee's benefits exceed $2,000 in taxable value for the FBT year, the grossed-up amount is reported on their income statement. It is not taxed again, but it affects income tests such as the Medicare levy surcharge, HELP repayments and child support.  

What happens if an FBT lodgement is late? 

Late lodgement will result in failure-to-lodge penalties, and it tends to attract closer scrutiny given the ATO's focus on the FBT gap. The larger risk is not lodging at all: without a return there is no assessment, so the ATO can audit and amend that year indefinitely rather than within the usual three-year window. 

How can I add value to clients through FBT advice? 

You can add value by proactively identifying exposure across your client base, applying every available exemption, advising on employee contributions and salary packaging, and lodging nil returns to cap audit exposure. Standardising an annual FBT review turns a compliance obligation into a priced, repeatable advisory service rather than a job most firms avoid. 

FBT is the tax your clients are least equipped to spot, and the one the ATO is increasingly equipped to find. That combination is exactly what makes it an opportunity. The practices that build a consistent annual FBT review protect their clients from indefinite audit exposure, capture the exemptions that save real money, and turn hours of avoided compliance into a service worth charging for.  

Whether you systemise it with the ChangeGPS or build your own process, the move that matters is the same: get FBT off the back foot and onto your advisory agenda.