Fringe Benefits Tax 2025: Essential Updates for Employers

As the Fringe Benefits Tax (FBT) year wrapped up on 31 March 2025, it’s vital for employers to stay across the latest regulatory changes and compliance expectations.

The 2024–25 period brings forward several updates that could affect how employers manage benefits provided to staff, especially concerning electric vehicles, remote work equipment, and the classification of workers.

Changes to Electric Vehicle Exemptions

Electric vehicles continue to enjoy a valuable FBT exemption, provided they meet specific criteria. To qualify, the vehicle must be classified as a low or zero-emission car, such as battery electric, hydrogen fuel cell, or plug-in hybrid electric.

Importantly, it must be first held and used on or after 1 July 2022 and be valued below the fuel-efficient car threshold, which has now increased to $89,332 for the current financial year.

Phase-Out of Plug-in Hybrid Exemption

Starting 1 April 2025, plug-in hybrids will no longer fall under the FBT exemption unless the vehicle was exempt before this date and is still under a legally binding agreement for continued use.

If that agreement ends or changes, the exemption will likely no longer apply. Employers should assess their arrangements well before this deadline to avoid unexpected FBT liabilities.

Reporting Requirements for Exempt EVs

Even though an electric vehicle may be exempt from FBT, employers are still required to calculate the notional taxable value and include this figure in the employee’s reportable fringe benefits.

This value may impact various areas such as social security payments, the Medicare levy surcharge, private health insurance rebates, and any employee share scheme reductions.

Home Charging and Contributions

Employees who charge company-provided electric vehicles at home can potentially reduce the FBT value through private contributions.

The Australian Taxation Office offers a shortcut method, allowing employers to calculate home charging costs at a rate of 4.20 cents per kilometre.

However, it’s important to note that this shortcut does not apply to plug-in hybrid vehicles.

Additionally, charging stations installed at an employee’s home are not covered under the current exemption rules.

Remote Work Tools and Equipment

With flexible work still common across many sectors, employers may provide equipment such as laptops, phones, or tablets to support productivity at home.

As long as these items are primarily used for work, FBT generally does not apply.

This is particularly advantageous for small businesses with a turnover under $50 million, who can supply multiple similar work-related tools within a single FBT year without incurring tax.

Should there be significant private use of the equipment, however, employers must be prepared to assess and report that portion for FBT purposes.

Understanding Employee vs Contractor Obligations

FBT obligations are closely tied to whether a benefit is given to an employee, as opposed to a contractor.

While benefits to employees are typically subject to FBT, those provided to genuine independent contractors are not.

The challenge lies in correctly classifying the working relationship. The ATO’s 2023 ruling, TR 2023/4, reinforces that written contracts will be central to how employment relationships are interpreted for tax purposes.

Employers must ensure that contractual terms align with the actual day-to-day working arrangements.

If there is a mismatch or lack of clarity, the ATO may determine that a worker is in fact, an employee, with corresponding obligations including FBT, superannuation, and payroll tax.

Streamlining FBT Record-Keeping

From 1 July 2024, employers can choose between existing FBT record-keeping methods or use business records that meet specified criteria to fulfil their reporting requirements. This aims to simplify the administrative load for employers, especially small to medium businesses.

One practical approach that remains relevant is encouraging staff with employer-provided vehicles to take a photo of their odometer on both 31 March and 1 April. Sending this to a central inbox provides a simple audit trail that supports accurate record-keeping for FBT declarations.

Risk Areas to Be Aware Of

Entertainment expenses remain a closely watched category for FBT compliance. The ATO often compares FBT disclosures with income tax deductions claimed for meals, functions, or gifts. Using different calculation methods—such as the actual method or the 50/50 method—can lead to vastly different FBT liabilities.

Employers must be consistent in both their tax filings and FBT lodgements to avoid scrutiny. Another area of concern involves employee contributions.

Employers often reduce their FBT exposure by applying after-tax contributions from employees. These contributions are sometimes processed as journal entries in accounting software.

However, without proper documentation, such entries may not stand up to ATO review. To ensure compliance, businesses must retain clear records that link these contributions to both FBT reporting and income tax filings.