FREE TOOL · ATO-CURRENT 47% RATE · UPDATED FOR 2025-26 FBT YEAR
Calculate Fringe Benefits Tax with Type 1 (2.0802) and Type 2 (1.8868) gross-up at the current 47% rate. Includes novated lease take-home calculator, EV exemption check, charity/hospital salary packaging caps, and car FBT methods. ATO-aligned and updated for the 2025-26 FBT year (1 April 2025 – 31 March 2026).
REME flags fringe benefits, novated lease components, and salary packaging deductions automatically when employees submit expenses via WhatsApp. Built specifically for Australian finance teams managing FBT compliance.
Fringe Benefits Tax is a tax employers pay on certain non-cash benefits provided to employees — company cars, low-interest loans, employer-provided housing, entertainment, and similar perks. The current FBT rate is 47%, applicable across the 31 March 2023 to 31 March 2027 FBT years. The FBT year runs from 1 April to 31 March (NOT the Australian financial year of 1 July to 30 June) — a common source of confusion for finance teams.
The canonical 4-step FBT calculation process:
For each fringe benefit, calculate its taxable value. Different benefit types have different valuation methods — cars use statutory formula (20% of base value) or operating cost method, expense payments use the actual cost, loans use the difference between the actual interest and the FBT-deemed rate.
Two gross-up rates apply based on whether GST credit is claimable on the benefit. Type 1 (gross-up factor 2.0802) — when GST credit is claimable, typically because the benefit was provided by a GST-registered supplier with a proper tax invoice. Type 2 (gross-up factor 1.8868) — when no GST credit, typically for benefits provided by non-GST-registered suppliers or where no GST applies.
Add the Type 1 grossed-up values together, and separately add the Type 2 grossed-up values. The total is the company's "fringe benefits taxable amount" for the FBT year.
Multiply the total fringe benefits taxable amount by 47% to get the FBT payable. This is what the employer pays to the ATO. The current 47% rate has been in effect since 31 March 2023 and runs through 31 March 2027.
The gross-up factor "grosses up" the taxable value of a fringe benefit to what it would have cost the employee in pre-tax salary. The two rates exist because of GST treatment. Here's when each applies:
When to use:
Common examples:
The higher gross-up factor reflects that the employer can claim back the GST — the gross-up restores equivalence between taking the benefit and taking equivalent cash salary.
When to use:
Common examples:
The lower gross-up factor reflects that no GST is recoverable — the gross-up only needs to account for income tax, not GST.
A novated lease is a three-way arrangement between an employee, their employer, and a finance provider. The employee leases a vehicle, but the employer takes responsibility for the lease payments and deducts them from the employee's pre-tax salary. The result: the employee gets a car using pre-tax dollars, the employer provides a benefit without significant cash flow impact, and the lease provider gets a low-risk customer because payments come straight from payroll.
Lease payments and running costs are deducted from the employee's salary BEFORE income tax is calculated. For an employee in the 30% marginal tax bracket with $20,000/year in lease + running costs, that's $6,000/year in income tax savings.
Because the employer is GST-registered and the lease payments include GST, the employer claims back the GST as an input tax credit. This 1/11th saving is typically passed back to the employee, further reducing the effective cost.
The car is a fringe benefit, so FBT applies. Most novated leases use the statutory formula method: taxable value = 20% × base vehicle value. For a $50,000 car, that's $10,000 taxable value. Grossed up at Type 1 (2.0802) = $20,802. FBT at 47% = $9,777/year.
The employee compares: (income tax saved + GST saved) vs. (FBT cost). For most employees in higher tax brackets driving newer cars, the math is positive — tax savings exceed FBT cost. The novated lease tab in the calculator above runs this math precisely for your specific scenario.
Battery electric vehicles (BEVs) and hydrogen fuel cell vehicles (FCEVs) qualify for the FBT exemption when first held on or after 1 July 2022. Eligible PHEVs also qualified — but only until 1 April 2025. PHEVs first held on or after that date no longer qualify. With FBT exemption, the entire FBT cost in Step 03 above goes to zero, making EV novated leases dramatically more attractive than ICE equivalents. The EV Exemption tab in the calculator above checks eligibility.
For company-provided cars (or novated leases), employers can choose between two FBT calculation methods. The choice usually depends on the car's business use percentage and the complexity the employer is willing to handle.
How it works: Taxable value = 20% × base value of the car (regardless of usage). For a $50,000 car: $10,000/year taxable value.
Pros: Simplest method — no logbook, no operating cost tracking. Predictable annual FBT cost. Standard for novated leases.
Cons: Doesn't reduce FBT for cars used predominantly for business. The 20% is fixed regardless of actual usage.
How it works: Taxable value = total operating costs × (1 - business use %). Business use % substantiated by logbook (12-week minimum).
Pros: Lower FBT for high-business-use vehicles. Reflects actual usage. Can yield significant savings for sales reps, drivers.
Cons: Logbook required (12-week minimum, valid for 5 years). More complex administration.
Rule of thumb: if business use is below 50%, use statutory formula. Above 50%, calculate both — operating cost typically wins.
Australia's FBT system gives certain employer types special concessional treatment for salary packaging arrangements. These caps allow employees to package a certain amount of benefits FBT-free, making total compensation more tax-efficient. The three concessional categories:
A$30,000 grossed-up
PBIs include charities focused on relieving distress, poverty, sickness, suffering, etc. Employees can package up to A$30,000 of grossed-up benefits FBT-free annually. Common packaging items: rent/mortgage payments, school fees, groceries, utilities, holidays.
A$17,000 grossed-up
Public hospitals and NFP private hospitals. Employees (including doctors, nurses, allied health) can package up to A$17,000 grossed-up FBT-free. Common packaging: meal entertainment, holiday accommodation, on top of standard salary.
A$5,000 grossed-up
Other charities, religious institutions, and certain not-for-profits. Employees can package up to A$5,000 grossed-up FBT-free, plus the employer receives a 47% rebate on FBT for additional benefits above the cap.
The caps are GROSSED-UP amounts, not taxable values. So for PBI's $30,000 cap with Type 1 gross-up of 2.0802: the actual taxable value of benefits that can be packaged FBT-free is $30,000 ÷ 2.0802 = $14,422 per year. The calculator's Salary Packaging tab above handles this calculation automatically.
The Treasury Laws Amendment (Electric Car Discount) Act 2022 made certain electric vehicles FBT-exempt when used as a fringe benefit. This makes EV novated leases dramatically more attractive than ICE equivalents — the FBT cost goes to zero. But the rules have changed over time, and PHEVs lost exemption from 1 April 2025. Here's the current state:
Even with FBT exemption, the value of the car still counts toward the employee's Reportable Fringe Benefits Amount (RFBA). This affects: Medicare levy surcharge thresholds, HELP/HECS repayment thresholds, income-tested government benefits, and Family Tax Benefit calculations. For high-income employees, the practical impact is small. For lower-income employees, the RFBA effect can offset some of the tax savings.
The car's GST-inclusive purchase price must be below the luxury car tax threshold for fuel-efficient vehicles. For 2025-26 this is A$89,332 (the non-fuel-efficient threshold of A$80,567 doesn't apply to EVs since they're inherently fuel-efficient by definition).
PHEVs first held BEFORE 1 April 2025 retain their FBT exemption indefinitely. Only PHEVs first held on or after 1 April 2025 are excluded from the exemption.
FBT CALCULATOR FAQ
The standard 4-step process: (1) Determine the taxable value of each fringe benefit using the appropriate valuation method (cars use statutory formula or operating cost; expense payments use actual cost; loans use the difference between actual interest and the FBT-deemed rate). (2) Apply the gross-up factor — Type 1 (2.0802) when GST credit is claimable, Type 2 (1.8868) when no GST credit. (3) Sum the grossed-up values across all benefits provided in the FBT year. (4) Multiply by the FBT rate of 47%. The current 47% rate is applicable across the 31 March 2023 to 31 March 2027 FBT years. The calculator above runs all four steps automatically for the most common scenarios.
There's no FBT limit per individual employee in general — but there are two important caps to know about. First, the Reportable Fringe Benefits Amount (RFBA) threshold: when an employee receives more than A$2,000 in non-cash benefits in an FBT year, the grossed-up value (using the lower Type 2 factor of 1.8868) appears on their PAYG payment summary. This affects income-tested calculations like Medicare levy surcharge and HELP repayments. Second, salary packaging caps for concessional employer types: PBI A$30,000 grossed-up, public/NFP hospital A$17,000 grossed-up, rebatable employer A$5,000 grossed-up.
FBT is 47%, applicable across the 31 March 2023 to 31 March 2027 FBT years. The FBT year runs from 1 April to 31 March (note: this is NOT the same as the Australian financial year of 1 July to 30 June — a common source of confusion). The 47% rate has been in effect since 31 March 2023 and is currently scheduled to apply through 31 March 2027.
Several legitimate strategies. (1) Provide cash salary increases instead of fringe benefits — employees pay income tax (likely lower than FBT for most brackets) but no FBT applies. (2) Use FBT-exempt benefits where possible — work-related items (laptops, phones, protective clothing), minor benefits under A$300, employer contributions to super, work-related travel. (3) For cars: choose an EV that qualifies for the FBT exemption (BEVs, FCEVs, and pre-April 2025 PHEVs). (4) Use the operating cost method for cars with high business use percentage. (5) For employers in concessional categories (PBI, hospitals, rebatable), use the salary packaging caps strategically.
The current FBT rate is 47%, applicable across the 31 March 2023 to 31 March 2027 FBT years. The FBT year runs from 1 April to 31 March. This rate has been steady at 47% since 31 March 2023 and is scheduled to continue through 31 March 2027 unless legislation changes.
When an employee salary sacrifices an item (typically a car via novated lease), the employer takes responsibility for that item and deducts the cost from the employee's pre-tax salary. The employee pays less income tax (because their salary is lower for tax purposes), but FBT may apply depending on the type of benefit. For superannuation salary sacrifice: no FBT (super contributions are FBT-exempt). For a car via novated lease: FBT applies based on statutory formula or operating cost method. The Novated Lease tab in the calculator above runs the full salary sacrifice math for car leases including FBT, GST savings, and net take-home impact.
For employers, FBT is calculated on the total fringe benefits provided to all employees, not per employee. Use the calculator above or follow the 4-step process: determine taxable value of each benefit, apply the appropriate gross-up factor, sum across all benefits, multiply by 47%. For employees evaluating a salary packaging arrangement, the relevant calculation is the net benefit: (income tax saved + GST saved on the benefit) - (FBT cost on the benefit). The Novated Lease tab shows this employee-perspective calculation.
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