Fringe Benefits Tax (FBT) applies to non-cash benefits provided to employees in addition to their salary. In Australia, FBT is a separate tax paid by the employer - not the employee - and operates on its own year (1 April to 31 March). Common fringe benefits include company cars, car parking, entertainment, employee discounts and living-away-from-home allowances. Understanding what triggers FBT and how to minimise it is essential for employers.
Identify all non-cash benefits provided to employees during the FBT year
Classify each benefit by type (car, expense payment, property, etc.)
Determine the taxable value of each fringe benefit
Apply any available exemptions or reductions (e.g., minor benefits exemption)
Calculate the grossed-up value using the appropriate gross-up rate
Complete and lodge the FBT return by 21 May
Pay any FBT owing by 21 May
Report reportable fringe benefits on employee payment summaries
Businesses in Australia operating under the GST + BAS system must meet these compliance requirements set by ATO:
Not realising that FBT applies to your business
Forgetting that entertainment expenses can trigger FBT
Not keeping adequate records of employee car usage
Not applying the minor benefits exemption for benefits under $300
Confusing the FBT year (April-March) with the financial year (July-June)
Not reporting reportable fringe benefits amounts on employee payment summaries
SortBooks connects to your Xero account and finds transactions sitting in catch-all accounts. AI suggests the right account and tax code, learning from your own past coding. You approve it and SortBooks updates Xero. Reconciled transactions are locked by Xero, so those stay in SortBooks with an Open in Xero link.
AI suggests a category and GST + BAS code for each transaction. You approve it before anything changes in Xero.
Growth and above get a quarterly GST/VAT estimate to check before you lodge with ATO.
Ask about your P&L, cash and who owes you, using live Xero data. Every dollar figure is checked against Xero.
The FBT rate in Australia is 47% - the same as the top marginal tax rate plus Medicare levy. This is applied to the grossed-up taxable value of the benefit. The high rate makes it important to minimise FBT where possible through exemptions and concessions.
Key exemptions include: minor benefits under $300, work-related items (laptops, phones, tools of trade), exempt vehicles (certain electric vehicles), and the small business car parking exemption. Some benefits can be reduced through employee contributions.
SortBooks categorises entertainment, vehicle and employee benefit transactions separately in Xero, making it easy to identify potential FBT obligations. It flags transactions that may have FBT implications and keeps records organised for your FBT return preparation.
AI suggests, you approve, SortBooks updates Xero. Try it free for 14 days.