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Fringe benefits tax - a guide for employers

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Here you will find:

  • a list of chapters that comprise the guide with links to each
  • the definition of key terms used throughout the guide
  • the primary fringe benefits tax (FBT) legislative references referred to throughout the guide.

A table of any major changes and updates made at each review can be found within each chapter.

Definition of key terms



Activity statement

Used to report your business tax entitlements and obligations, including FBT instalments, goods and services tax (GST), pay as you go (PAYG) instalments and withheld amounts.

Aggregate non-exempt amount

The amount that exceeds the capping threshold of the grossed-up taxable value of benefits provided to employees.

All-day parking

The parking of a single car for a continuous period of at least six hours or more between the hours of 7.00am and 7.00pm on a particular day.


People and entities closely associated with you - such as relatives, or closely connected companies or trusts. A formal definition is contained in section   318 of the Income Tax Assessment Act   1936 and is modified by sections   148 , 158 and 159 of the Fringe Benefits Tax Assessment Act   1986 .

Available for private use

A car is considered to be available for private use if it is either:

  • not at your premises, and the employee is allowed to use it for private purposes
  • garaged at or near an employee's home.

If a car is garaged at an employee's (or an associate's) home, it is treated as being available for their private use, regardless of whether they are actually allowed to use it privately. If the employee's home is their workplace, the car is considered to be available for their private use if it is garaged there.


Base value

The base value of a car owned includes:

  • the original cost price paid
  • the cost of any fitted non-business accessories
  • dealer delivery charges, excluding registration and stamp duty charges.

The base value of a car leased to an employer is the cost price or market value at the time the lease commenced.

Base year

For purposes of the record keeping exemption arrangements, this is the FBT year ended 31   March   1997 or any following year.

Benchmark interest rate

Also known as the statutory interest rate. This interest rate is published by the Commissioner of Taxation each year and must be used to calculate the taxable value of either:

  • a fringe benefit provided by way of a loan
  • a car fringe benefit where an employer chooses to value the benefit using the operating cost method.

Includes any right, privilege, service or facility.

Business premises

Premises, or part of premises, that are used, in whole or in part, for the purposes of business operations.



The following types of vehicles (including four-wheel drive vehicles) are cars:

  • motor cars, station wagons, panel vans and utilities (excluding panel vans and utilities designed to carry a load of one tonne or more)
  • all other goods-carrying vehicles designed to carry less than one tonne
  • all other passenger-carrying vehicles designed to carry fewer than nine occupants.
Commercial parking station

Is one that, in relation to a particular day, means a permanent commercial car parking facility where any or all of the car parking spaces are available in the ordinary course of business to members of the public for all-day parking on that day on payment of a fee. It doesn't include a parking facility on a public street, road, lane, thoroughfare or footpath paid for by inserting money in a meter or by obtaining a voucher.

Cost price

Generally, the expenditure incurred by you or the lessor for the acquisition or delivery of the car. Usually, this is the purchase price that has been paid, although there may be arrangements in place that have an impact on the cost price.

For example, where an employee provides a trade-in, the cost price would be the purchase price minus the trade-in.

Alternatively, where:

  • the transaction involves a payment by another person directly to a car dealer, the cost price would normally be the net amount you actually pay
  • an employee pays an amount directly to you, you will need to look at the terms of any agreements and contracts in place to determine whether this payment is an employee contribution or not.



A written advice given to an employer by an employee about the following information relating to fringe benefits received:

  • the percentage of business/private use
  • the reduction allowed under the 'otherwise deductible' rule.

Declarations are required to be in a form approved by the Commissioner of Taxation. The approved wording and information to be contained in these employee declarations are included throughout the guide.

Declaration date

The date an employer is required to lodge their FBT return (21   May) for the FBT year, or such later date as the Commissioner of Taxation allows.



Means a:

  • current employee
  • future employee, or
  • former employee.

An employee is generally someone who receives, or is entitled to receive, salary and wages in return for work or services provided, or for work under a contract that is wholly or principally for the person's labour.

For FBT, 'employees' includes company directors, office holders, common law employees and recipients of compensation payments.

Employee or recipient's contribution

Also known as a recipient's payment or recipient's rent.

Generally, the payment is a cash payment made by an employee to you or the person who provided the benefit. The employee or recipient's contribution must be made from the employee's after-tax income.

An employee or recipient's contribution may have to be included in your assessable income (as a general rule, the costs incurred by providing fringe benefits are income tax deductible).

Excluded fringe benefits

Benefits that are excluded from the reportable fringe benefits arrangements. They are still taxable benefits.

Exempt benefits

Benefits that are not considered to be fringe benefits and, therefore, are not subject to FBT.


FBT year

Runs from 1   April to 31   March.

Fringe benefit

Benefit provided to an employee (or their associate, such as a family member) in respect of employment. Benefits can be provided by you, your associate or by a third party under an arrangement with you. An employee can be a current, future or former employee.


Goods and services tax

Broad-based tax of 10% on the supply of most goods, services and anything else consumed in Australia, and the importation of goods into Australia.

Grossing up

Increasing the taxable value of benefits you provide to reflect the gross salary employees would have to earn at the highest marginal tax rate (including Medicare levy) to buy the benefits after paying tax.

GST (input tax) credit

You are entitled to a GST input tax credit for the GST included in the price of purchases you make for use in your business. But you are not entitled to a credit to the extent you use the purchases for private purposes or, in many cases, to make input taxed sales. You will need to have a tax invoice to claim a GST credit (except for purchases with a GST-inclusive price of $55 or less, although you should have some documentary evidence to support these claims).


Income tax exempt charity

A charity that has been endorsed by the Australian Taxation Office (ATO) as exempt from income tax.

Individual fringe benefits amount

Total taxable value of all fringe benefits (other than excluded fringe benefits) provided to a particular employee in an FBT year. It includes benefits provided to an associate of the employee. The individual fringe benefits amount also includes benefits provided by your associate or under an arrangement between you and a third party.



Log book year

A year is a log book year if either:

  • none of the previous four years was a log book year for that car
  • you elect to treat the year as a log book year (for example, to increase the nominated percentage of business travel)
  • the Commissioner of Taxation, by written advice, requires you to treat the year as a log book year.


Market value

The arm's length price payable by the general public in a normal commercial transaction.

Meal entertainment

The provision of meal entertainment means the provision of either:

  • entertainment by way of food or drink
  • accommodation or travel in connection with, or to facilitate the provision of, such entertainment
  • the payment or reimbursement of expenses incurred in obtaining something covered by the above.


Notional tax amount

The amount on which FBT instalments are based. Generally, this is the amount of tax assessed for the last return lodged.


One-kilometre radius

For purposes of a car parking fringe benefit, the one-kilometre distance is measured not by radius but by the shortest practicable direct route (by whichever means this route is travelled - for example by foot, car or boat).

Operating cost method

Also known as the log book method. The taxable value of a car fringe benefit is a percentage of the total costs of operating the car during the FBT year. The percentage varies with the extent of actual private use. The lower the private use of the car, the lower the taxable value will be.

Otherwise deductible rule

The taxable value of a benefit may be reduced by the amount that an employee would have been entitled to claim as an income tax deduction in their personal tax return if the benefit was not paid for, reimbursed or provided by you, the employer.


Place of residence

A place where a person lives or has sleeping accommodation. It doesn't matter whether it is on a permanent or temporary basis. It also doesn't matter whether the person shares the place with someone else.

Primary place of employment

Basically, the employer's premises at which the employee performs the majority of their employment-related duties on a particular day.

Private use

A car is made available for private use by an employee on any day the car is not at your premises and the employee is allowed to use it for private purposes, or the car is garaged at the employee's home.


Quasi-fringe benefits

Benefits that are exempt from FBT solely because they are provided to either:

  • employees of public benevolent institutions, certain charitable institutions or some hospitals (including government employees who work in public hospitals)
  • live-in carers of disadvantaged or elderly people where the employer is a government body, religious institution or non-profit company.

Quasi-fringe benefits are included in the employee's reportable fringe benefits amount.


Rebatable employer

Certain non-government, non-profit organisations. Those that may qualify for an FBT rebate include:

  • religious, educational, charitable, scientific or public educational institutions
  • trade unions and employer associations
  • non-profit organisations established
    • to encourage music, art, literature or science
    • to encourage or promote a game, sport or animal races
    • for community service purposes
    • to promote the development of aviation or tourism
    • to promote the development of Australian information and communications technology resources
    • to promote the development of the agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources of Australia.
Remote area

For most employers, accommodation is in a remote area if it is not in or near an urban centre. The accommodation must be located at least 40   kilometres from a town with a census population of 14,000 to less than 130,000, and at least 100   kilometres from a town with a census population of 130,000 or more (population figures based on the 1981   Census).

If the accommodation is in zone   A or   B (for income tax purposes), it must be located at least 40   kilometres from a town with a census population of 28,000 to less than 130,000, and at least 100   kilometres from a town with a census population of 130,000 or more.

Where the shortest practical surface route between a locality and an eligible urban area includes a route by water, the distance travelled by water is doubled for the purposes of working out how remote that locality is from the eligible urban area.

Where the circumstances warrant it, the Commissioner of Taxation has the discretion to treat a person who resides or works in an area adjacent to an eligible urban area as residing or working outside that area if people who live or work near that person are outside the area.

An extended exemption applies to housing benefits provided to employees of certain hospitals, charitable institutions or a police service. For such benefits, accommodation is treated as being in a remote area where it is situated at least 100   kilometres from a town with a census population of 130,000 or more.

Reportable fringe benefits amount

If you provide fringe benefits with a total taxable value of more than $2,000 to an employee in an FBT year, you must report the grossed-up taxable value on the employee's payment summary. These are called reportable fringe benefits.

Before 1   April   2007, the reporting exclusion threshold was $1,000.

Representative fee

For the purposes of a car parking fringe benefit, the fee for any particular day is not representative if it differs substantially from the average lowest fee ordinarily charged for all-day parking. For this purpose, an employer may compare the fee for a particular day with the average fee charged during either of the four-week periods beginning or ending on that particular day.


The place, especially the house, in which a person resides. It also means a dwelling place or a dwelling.

Residual fringe benefit

Any fringe benefit that doesn't fit into one of the other 12   categories of fringe benefits.


Salary sacrifice arrangement

An arrangement between an employer and an employee, whereby the employee agrees to forgo part of their future entitlement to salary or wages in return for the employer or associate providing them with benefits of a similar value.

Small business entity

An entity that carries on a business and satisfies the annual turnover test of $2   million. A formal definition is contained in section   328-110 of the Income Tax Assessment Act   1997 .

Statutory formula method

The statutory formula method for car fringe benefits is based on applying a statutory percentage to the car's base value.

Statutory interest rate

Also known as the benchmark interest rate. This interest rate is published by the Commissioner of Taxation each year and must be used to calculate the taxable value of either:

  • a fringe benefit provided by way of a loan
  • a car fringe benefit where an employer chooses to value the benefit using the operating cost method.
Statutory percentage

When calculating the taxable value of a car fringe benefit using the statutory formula method, the car's base value is multiplied by a statutory percentage.

For all car fringe benefits provided after 7.30pm   AEST on 10   May 2011 (except where there is a pre-existing commitment in place to provide a car) a flat statutory rate of 20% applies.

For car fringe benefits provided prior to 7.30pm AEST on 10   May 2011, or where you have a pre-existing commitment in place to provide the car after this time, the statutory percentage varies according to the total number of kilometres travelled by the car during the FBT year.


Taxable supplies (sales)

For GST, a sale or supply includes a sale of goods or services, a lease of premises, hire of equipment, giving of advice, export of goods and the supply of other things. You are required to pay GST on taxable supplies (sales) you make. You are entitled to claim GST credits for the GST included in the price of purchases you use to make taxable supplies.

You make a taxable supply if you are registered or required to be registered for GST and:

  • you make the supply for consideration
  • you make the supply in the course of furtherance of a business (enterprise) you carry on
  • the supply is connected to Australia.

However, the supply is not taxable to the extent it is either GST-free or input taxed.

Taxable value

The value of fringe benefits that you use as a basis for calculating your FBT liability. There are different rules for calculating the taxable value of the different types of fringe benefits.

Type 1 gross-up rate

Used where an employer (or other provider) is entitled to claim a GST (input tax) credit.

The rate is   2.0647 .

Prior to the FBT year commencing 1   April   2006, the type   1 gross-up rate was   2.1292.

Type 2 gross-up rate

Used where an employer (or other provider) is not entitled to claim a GST (input tax) credit.

The rate is   1.8692 .

Prior to the FBT year commencing 1   April   2006, the type   2 gross-up rate was   1.9417.


Usual place of residence

An employee is regarded as living away from their usual place of residence if they are required to do so in order to perform their employment-related duties and could have continued to live at the former place if they did not have to work temporarily in a different locality.

Whether a place is an employee's usual place of residence is a question of fact, based on all the circumstances.

Primary legislative references

The FBT legislation was enacted in a package of the following four acts that were passed by Parliament in 1986.

  1. Fringe Benefits Tax Assessment Act   1986 : establishes the rules for assessing and collecting the tax. Most of the information in the guide relates to the legislation contained in this Act. The Act is quite separate from the income tax assessment acts.
  2. Fringe Benefits Tax Act   1986 : imposes tax on the taxable value of fringe benefits. Any change to the rate of tax is effected by amending this Act.
  3. Fringe Benefits Tax (Application to the Commonwealth) Act   1986 : ensures that the FBT legislation also applies to Australian Government authorities and departments.
  4. Fringe Benefits Tax (Miscellaneous Provisions) Act   1986 : amended the Income Tax Assessment Act   1936 so that employees would not be liable for income tax on any fringe benefits received. This Act is available on the ComLaw website .

Last Modified: Monday, 31 October 2011

ATO references:
NO NAT 1054

Fringe benefits tax - a guide for employers
  Date: Version:
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