Latest estimate and trends for the FBT gap

2022–23 FBT gap estimate

For 2022–23, the net fringe benefits tax (FBT) gap estimate was $1.8 billion or 30.4%. In other words, we expect to receive almost 70% of the total amount of FBT we would expect to receive if everyone was fully compliant.

Compare the FBT gap with trends from previous years

Expected collections for FBT dropped during COVID-19 lockdown affected years and have now recovered to pre-COVID-19 levels. This trend is mostly driven by large employers. Since the 2020–21 FBT year, there has been growth in reported fringe benefits for large employers across most categories, including the major categories of expense payments, car fringe benefits and other residual benefits.

Conversely, trends in unreported FBT (which we estimate has steadily increased over time), are driven by small-medium (SME) sized employers. Increases in the amount of unreported FBT are attributable to larger numbers of SME employers providing motor vehicle fringe benefits without registering for the FBT regime.

In 2022–23, growth in FBT revenue from larger employers outpaced unreported FBT from small-medium sized employers, resulting in an overall reduction the FBT gap (30.4%, down from 33.2%).

It is important to recognise that the FBT system is a component of the broader PAYG withholding income tax on salary and wages regime. When we view PAYG withholding and FBT together, the integrated gap is approximately 2.3%. This means employers are voluntarily paying more than 97% of taxes related to their employees' remuneration.

This gap forms a part of our overall tax performance program. For more information about why and how we measure tax gaps, see latest available tax gap data.

Table 1: FBT gap – 2017–18 to 2022–23
Element	2017–18	2018–19	2019–20	2020–21	2021–22	2022–23
Population	852,949	856,013	898,563	934,120	951,930	960,327
Net revenue effect gross gap ($m)	1,578	1,535	1,651	1,816	1,786	1,844
Amendments ($m)	30	25	20	38	29	29
Net revenue effect net gap ($m)	1,548	1,509	1,631	1,779	1,757	1,815
Expected collections ($m)	3,859	3,913	3,918	3,271	3,541	4,147
Theoretical liability ($m)	5,999	5,995	6,170	5,685	5,918	6,572
Net revenue gross gap (%)	29.2	28.3	29.8	36.0	33.7	30.9
Net revenue net gap (%)	28.6	27.8	29.4	35.2	33.2	30.4

Figure 1 displays the trend in the gross and net income tax gap over the same period as a percentage.

Figure 1: FBT net revenue effect gap summary diagram 2017–18 to 2022–23 (percentage)

The gross and net FBT gap in percentage terms, as outlined in Table 1.

What's driving the gap

The primary driver of the FBT gap is employers not participating in the FBT system when they provide benefits to employees. An example of this is when an employer doesn't lodge an FBT return but provides motor vehicle benefits to their employees and has an FBT tax liability. In comparison, the FBT gap associated with those who are already in the FBT system, but have not reported their FBT liability correctly, is relatively low.

Contact between tax agents and their clients for FBT matters is often ad hoc in nature. This contrasts with the strong focus and regular contact on income tax and GST. Some employers may not want to engage a tax agent to undertake FBT work because they do not want the additional cost.

Around a third of FBT adjustments result from a lack of awareness by either the employer or the tax agent. There are issues in understanding:

FBT law
rules of valuing, calculating, reporting and paying FBT on benefits provided
concessions and exemptions for example, car fringe benefits errors in relation to which vehicles are exempt.

The following Table 2 and Figure 2 show the relative contribution to the overall FBT gap of non-compliant employers outside of the FBT system (unregistered portion) versus non-compliant employers already participating in the FBT system (registered portion).

Table 2: FBT net revenue effect of gap by registration, 2017–18 to 2022–23 (percentage)
Element	2017–18	2018–19	2019–20	2020–21	2021–22	2022–23
FBT net revenue effect net gap	28.6	27.8	29.4	35.2	33.2	30.4
Unregistered portion	23.9	24.1	24.7	28.6	28.0	25.3
Registered portion	4.7	3.8	4.7	6.6	5.1	5.1

Figure 2: FBT net revenue effect gap, registered and unregistered portions

The relative contribution to the overall FBT gap of non-compliant employers outside of the FBT system (unregistered portion) versus non-compliant employers already participating in the FBT system (registered portion), as outlined in Table 2.

For previously published tax gap figures, see Australian Tax Gaps - Data.gov.auOpens in a new window