Work-related expenses covered by the standard deduction
From 1 April 2027, you'll no longer be able to use the 'otherwise deductible' rule to reduce your fringe benefits tax (FBT) liability for salary sacrificed work-related expense payment fringe benefits covered by the standard deduction.
This is regardless of the value and includes reimbursements or payments for work-related expenses such as:
- home office expenses
- home phone or internet expenses
- self-education expenses.
You can continue to use the otherwise deductible rule to reduce your FBT liability for expense payment fringe benefits that are either:
- not covered by the standard deduction
- covered by the standard deduction but aren't provided under a salary sacrifice arrangement.
Some work-related items will no longer be exempt
From 1 April 2027, certain work-related items will no longer be exempt from FBT when you provide them through a salary sacrifice arrangement, including:
- portable electronic devices
- computer software
- protective clothing
- briefcases
- tools of trade.
Eligible work-related items will remain exempt from FBT when they aren't provided under a salary sacrifice arrangement.
Multiple items with the same function will be exempt
From 1 April 2027, you can provide employees with more than one work-related item in an FBT year and continue to receive the exemption. This includes items with the same or substantially identical functions, provided the items fulfill all these conditions. They:
- are mainly used for work purposes
- aren't provided through a salary sacrifice arrangement.
This removes the current limit of one exempt item per employee, per FBT year. It also extends the exemption to all employers, not just small businesses.
What you should do
To prepare, we recommend you review the salary sacrificed work-related benefits you provide and understand which expenses are covered by the standard deduction.
This will help you determine whether the changes affect your business and the amount of FBT you may need to pay. You should:
- know how to correctly calculate your FBT
- keep the right records
- meet any reporting and lodgment obligations for the 2027–28 FBT year
- learn more about expense payments fringe benefitsThis link opens in a new window on our Essentials to strengthen your small business online learning platformThis link opens in a new window, or seek advice from a registered tax practitioner.
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