FBT Tips and Traps for Small Businesses

What is FBT?

FBT is a tax paid by employers on certain perks provided to employees or their family members – think company cars, entertainment expenses, and even university fees. FBT is separate from income tax and GST, meaning it needs to be reported and lodged separately.

The FBT year runs from 1 April to 31 March, with returns due by 21 May. Lodging electronically through a registered tax agent? You get extra time, with a due date of 25 June.

With the 2025 FBT year wrapping up, now’s the time to ensure compliance and take advantage of available concessions.

Minimising FBT on Company Cars: Strategies for Employers

Company cars are a popular way to reward staff, but they usually come with a hefty FBT bill. Employers are generally faced with two choices:

• Pay FBT at 47% on the grossed-up value of the benefit, or
• Have the employee make an after-tax contribution equivalent to the amount of the benefit.

TIP: Certain electric vehicles (EVs) are FBT-exempt, offering massive savings. To qualify, the EV must:

• Be a zero or low-emission vehicle, and
• Cost less than the Luxury Car Tax threshold ($91,387 for 2025).

Going electric doesn’t just help the environment—it’s a tax-savvy move for your business. 

If EVs aren’t a right fit for your business? There are still potential actions you can take to ease the FBT burden. If your employee mainly uses their car for work-related purposes, encouraging them to keep a detailed logbook can slash your FBT bill —simple records, big savings!

TRAP: Many employers overlook reporting obligations on EVs. While exempt from FBT, the taxable value of an EV must still be reported on the employee’s annual income statement for 30 June.

Be aware of the changes to the EV exemption for plug-in hybrids. Starting 1 April 2025, the exemption will no longer apply to plug-in hybrid cars first used after this date. It will be limited to battery electric vehicles only.

FBT and Employee Expenses: Maximising your exemptions

Paying or reimbursing employees for personal expenses like university fees or relocation costs can be a great incentive—but be mindful of the FBT impact.

TIP: Covering relocation costs can be an important, but costly, tool in attracting top talent. Avoid incurring FBT on these expenses, by structuring benefits to take advantage of the various FBT exemptions on relocation expenses. Certain costs—like removal and storage of household goods, temporary accommodation, and travel for the employee and their family—are FBT-free, provided they meet ATO criteria.

By covering these expenses without triggering an FBT liability, employers can offer competitive incentives, making it easier to secure and retain high value employees.

TRAP: Covering university fees might sound like a great perk, but it can trigger unexpected FBT! For an exemption to apply:

• The course must directly relate to the employee’s job; and
• Must not be a Commonwealth-supported place—ruling out most undergraduate degrees.

Navigating the Entertainment Trap

Entertainment expenses, such as meals and tickets to events, can be a grey area for FBT. Whether FBT applies depends on documentation and what calculation method you apply.

TIP: If entertainment is a core part of your business, keep detailed records—such as staff vs. client attendees—so you can correctly assess your FBT obligations.

TRAPS:

• Don’t misclassify food & drinks—light meals and sustenance are FBT-free.

• If FBT isn’t paid on entertainment, you can’t claim a tax deduction or GST credits—so watch your tax planning.

Common Mistakes and How to Avoid Them

The biggest FBT pitfalls? Poor record-keeping and misunderstanding exemptions. These lead to miscalculations, penalties, and missed savings.

Stay ahead by:

✅ Keeping detailed records and logbooks,
✅ Understanding FBT exemptions, and
✅ Seeking expert advice to avoid overpaying or underpaying FBT.

Unsure about your FBT obligations? Contact BLG today for a FBT health check!