Fringe benefits tax guide for accountants: 2026-27

This guide covers the parts of fringe benefits tax that come up most in an accounting practice: rates and gross-up, cars, electric vehicles, utes, parking, entertainment, minor benefits, reporting, lodgement and records. Every figure is taken from the ATO or the Act and linked at the point it is used.

The FBT year and the core rates

The FBT year runs from 1 April to 31 March. The current year is 1 April 2026 to 31 March 2027. The return for the year ended 31 March 2026 has already fallen due; the next return covers the year ending 31 March 2027.

The ATO's rates and thresholds page sets out the figures below. The FBT rate of 47% applies across the FBT years ending 31 March 2023 to 31 March 2027.

Item	FBT year ending 31 March 2026	FBT year ending 31 March 2027
FBT rate	47%	47%
Type 1 gross-up rate (provider can claim GST credits)	2.0802	2.0802
Type 2 gross-up rate (no GST credit)	1.8868	1.8868
Statutory percentage for cars (benefits from 1 April 2014)	20%	20%
Car parking threshold	$11.03	$11.48
Statutory or benchmark interest rate	8.62%	8.27%
EV home charging rate (PCG 2024/2)	4.20 cents per km	5.47 cents per km
Record keeping exemption threshold	$10,664	$10,962

The reportable fringe benefits threshold is a taxable value over $2,000, which is a grossed-up value of at least $3,773. Employers whose FBT liability for the last year was $3,000 or more pay quarterly instalments through activity statements.

How the gross-up works

The ATO's calculating your FBT page sets out the steps for a business employer:

1. Work out the taxable value of each benefit.
2. Add up the taxable values of benefits where the provider could claim a GST credit, and multiply by the type 1 rate of 2.0802.
3. Add up the taxable values of the other benefits (GST-free or input taxed), and multiply by the type 2 rate of 1.8868.
4. Add the two grossed-up amounts. This is the fringe benefits taxable amount.
5. Multiply by 47%. This is the FBT payable.

Worked example: an employer with mixed benefits

This example is the ATO's own (MantCo, on the calculating your FBT page).

Benefit	Taxable value	Gross-up type
Car benefit, employee 1 (GST included)	$7,700	Type 1
Car benefit, employee 2 (GST included)	$6,600	Type 1
Restaurant meals (GST included)	$2,200	Type 1
School fees (GST-free)	$6,000	Type 2

Type 1: $16,500 × 2.0802 = $34,323. Type 2: $6,000 × 1.8868 = $11,321. Fringe benefits taxable amount: $45,644. FBT payable: $45,644 × 47% = $21,452.68.

The rates have not changed between the two years, so the same arithmetic applies to the year ending 31 March 2027.

Car fringe benefits

A car fringe benefit arises when a car the employer holds is used or available for the private use of an employee or their associate. For FBT, a car is a motor vehicle (other than a motorcycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers including the driver. It includes four-wheel drives, and utes and vans under 1 tonne, and excludes motorcycles (ATO, Cars and FBT).

Two points from the ATO's page on how FBT applies to cars decide most files:

• Travel between home and work is usually private.
• A car garaged at or near the employee's home, even only for security, is treated as available for private use, whether or not the employee has permission to use it privately. The Act sets this out in subsection 7(2) of the FBTAA 1986.

The employer chooses between two valuation methods: the statutory formula method and the operating cost method. The ATO's taxable value page gives both formulas.

Statutory formula method

Taxable value = (A × B × C ÷ D) − E, where:

• A is the base value of the car.
• B is the statutory percentage, 20% unless a commitment was in place before the old rates were replaced.
• C is the number of days in the FBT year the car was used or available for private use.
• D is the number of days in the FBT year (365, or 366 in a leap year).
• E is the employee contribution.

Base value. For an owned car, base value is the cost price, which the ATO describes as including GST, luxury car tax, dealer delivery and the cost of non-business accessories fitted at purchase. Registration and stamp duty are excluded (ATO, Cars and FBT). Non-business accessories fitted later are added to base value under section 9(2) of the Act.

The four-year reduction. Under section 9(2) of the FBTAA, the cost price is multiplied by two-thirds where the start of the FBT year is later than the fourth anniversary of the date the employer first held the car. In practice a car first held on 15 June 2022 has its fourth anniversary on 15 June 2026, so the reduction applies from the FBT year starting 1 April 2027, not the current year.

Days available. Count the days the car was used or available for private use. The ATO's view is that a car in for routine servicing is still available, while a car in a workshop for extensive repairs after an accident is not (ATO). A car parked at the employee's home counts as available. If a car was bought partway through the year, only the days from when it was first held and available count.

Employee contributions. The taxable value is reduced by contributions the employee makes. A contribution paid directly to the employer is assessable income of the employer (ATO, reducing your FBT liability). The taxable value cannot fall below zero.

Worked example: statutory formula, full year

From the ATO's small business car guide: base value $30,000, available all 365 days, employee contributions $1,100.

$30,000 × 20% × 365 ÷ 365 = $6,000, less $1,100 = $4,900 taxable value.

If the employer could claim GST credits on the car costs, it is a type 1 benefit: $4,900 × 2.0802 = $10,192.98 grossed up, and FBT of $4,790.70 at 47%.

Worked example: car first available partway through the year

From the ATO's FBT return 2025 instructions (Example 6): base value $32,000, first available for private use on 1 July 2024, which is 274 days of a 365-day FBT year, no contributions.

$32,000 × 20% × 274 ÷ 365 = $4,804 taxable value (whole dollars, as shown on the return).

A practical point: in the FBT year ending 31 March 2028, D will be 366 because the year includes 29 February 2028.

Operating cost method

Taxable value = (A × B) − C, where A is the total operating costs of the car, B is the private use percentage and C is the employee contribution (ATO). Operating costs include fuel, repairs, registration, insurance, and deemed depreciation and interest for owned cars. The deemed depreciation rate for cars bought on or after 10 May 2006 is 25% (ATO rates page).

The ATO's small business car guide example: operating costs $11,480, private use 25%, contributions $1,100. $11,480 × 25% = $2,870, less $1,100 = $1,770.

The same car valued under the statutory formula would often give a higher figure where business use is high. The operating cost method rewards a good logbook.

Logbook rules

The ATO's small business car guide sets these out:

• The logbook covers a continuous 12-week period that is representative of the whole FBT year.
• A logbook stays valid for 5 years. A new one can be started at any time, and a change in the type of work may call for one.
• Each trip entry must describe the purpose clearly enough to show whether it is business or private. "Business" on its own is not enough.
• Keep a separate logbook for each car.
• Record odometer readings at the start (1 April) and end (31 March) of each FBT year.

Without a valid logbook, the business use percentage cannot be supported and the operating cost method gives a poor result.

Electric car exemption

The ATO's electric cars exemption page lists four conditions, all of which must be met:

1. The car is a zero or low emissions vehicle.
2. The first time the car was both held and used is on or after 1 July 2022.
3. The car is used by a current employee or their associate.
4. Luxury car tax has never been payable on the importation or sale of the car.

Zero or low emissions vehicle. A battery electric vehicle or a hydrogen fuel cell electric vehicle that is a car, meaning designed to carry a load of less than one tonne and fewer than 9 passengers including the driver. Electric motorcycles and scooters are not cars and do not qualify.

Held and used. A car is held if it is owned (including under hire purchase), leased, or made available by another entity. A car that was held before 1 July 2022 can still qualify if it was first used on or after that date. A car first held and used before 1 July 2022 does not qualify, even if a later owner provides it to an employee.

Luxury car tax. The car's value must be below the LCT threshold for fuel-efficient vehicles when first sold at retail and in any later sale. For second-hand cars, the employer needs to work out whether LCT was ever payable. The ATO's LCT thresholds:

Financial year	Fuel-efficient vehicles	Other vehicles
2022–23	$84,916	$71,849
2023–24	$89,332	$76,950
2024–25	$91,387	$80,567
2025–26	$91,387	$80,567
2026–27	$91,661	$80,809

The ATO notes that the definition of a fuel-efficient vehicle changed from 1 July 2025. LCT thresholds run on financial years (1 July to 30 June), not FBT years, so use the threshold for the date of the relevant sale. The ATO's GHI Co example shows a car bought in July 2022 for $85,000 GST-inclusive failing the test because LCT would have been payable.

It is still reportable. Private use of an exempt electric car is a reportable fringe benefit. The employer works out the notional taxable value (usually under the statutory formula or operating cost method) and checks whether the $2,000 reporting threshold is passed (ATO, reportable fringe benefits).

Associated car expenses. Registration, insurance, repairs and maintenance, and fuel including electricity for an eligible electric car are also exempt. A home charging station is not a car expense; it may be a property or expense payment benefit instead.

Home charging. Where electricity is paid by the employee and reimbursed, or needs to be valued for the operating cost method, the ATO allows the EV home charging rate (5.47 cents per km for the year ending 31 March 2027) or actual costs. The ATO's Bill example: 10,000 km travelled, 75% charged at home, home charging component $410.25.

Plug-in hybrids

From 1 April 2025 a plug-in hybrid is no longer a zero or low emissions vehicle (ATO, plug-in hybrids). The exemption continues for a plug-in hybrid only where both of these apply:

• the car was used or available for private use before 1 April 2025, and that use was exempt; and
• the employer has a financially binding commitment, made before 1 April 2025, to continue providing the car for private use on or after that date.

The ATO has no discretion to extend the date for delivery delays. The exemption stops from the date of any of these:

• a change to the existing commitment, including changed lease payments or residual value (the ATO's example is accessories added on 1 July 2025);
• an optional extension of a lease beyond its fixed term;
• a break in a novation agreement, such as unpaid leave ending the novation;
• a change of employer, even within the same corporate group.

Adding a replacement plug-in hybrid after an accident on the same pricing and end date, or adding roadside assistance to a flexible bundled service charge, did not end the exemption in the ATO's examples. Pool cars with no designated employee have no binding commitment and are not exempt.

Since 1 April 2025, section 8A(2) of the FBTAA defines a zero or low emissions vehicle as only a battery electric vehicle or a hydrogen fuel cell electric vehicle. Plug-in hybrids were removed by Schedule 2 of the Treasury Laws Amendment (Electric Car Discount) Act 2022, subject to the transitional rule described on the ATO's page.

Utes, vans and work vehicles

Private use of certain vehicles is exempt where the only private use is work-related travel (such as home to work) and other use that is "minor, infrequent and irregular". The ATO's example of minor, infrequent and irregular use is occasional use of the vehicle to remove domestic rubbish (ATO, exempt use of eligible vehicles). The ATO refers to PCG 2018/3 for more detail on what it accepts.

Eligible vehicles include:

• a single cab ute;
• a dual cab ute designed to carry a load of 1 tonne or more, or more than 8 passengers, or a load of less than 1 tonne where it is not designed for the principal purpose of carrying passengers;
• a panel van or goods van;
• some modified vehicles, taxis and four-wheel drives meeting design tests.

The exemption is in section 8(2) (eligible cars: utes and panel vans designed to carry less than 1 tonne, and taxis) and section 47(6) (other eligible vehicles, including those designed to carry 1 tonne or more or more than 8 passengers) of the FBTAA. The ATO suggests employers regularly compare opening and closing odometer readings with the expected home-to-work distance. A dual cab ute used for weekend trips away will not meet the test, and FBT applies to its private use in full.

Car parking

A car parking fringe benefit arises on a day when all of these apply (ATO, car parking and FBT):

• the car is parked at or near the employee's primary place of employment, on premises the employer owns, leases or controls;
• a commercial parking station within 1 km charges a fee for all-day parking above the car parking threshold on the first business day of the FBT year;
• the car is parked for more than four hours between 7am and 7pm;
• the employee drives between home and work at least once that day.

The threshold is $11.03 for the year ending 31 March 2026 and $11.48 for the year ending 31 March 2027.

Small business exemption. Parking is exempt where it is not in a commercial car park and, for the last income year before the FBT year, the employer had gross total income under $10 million or aggregated turnover under $50 million. Government bodies, listed public companies and their subsidiaries cannot use it.

The five valuation methods are commercial parking station, market value, average cost, 12-week register and spaces. Car parking benefits are excluded from reportable fringe benefits.

Entertainment

Meal entertainment can be valued three ways (ATO):

• Actual method. The taxable value is the actual cost of entertainment provided to employees and associates. Where clients are also entertained, the cost is apportioned, per head where needed.
• 50/50 split method. The taxable value is 50% of total meal entertainment expenditure for everyone, employees, clients and others alike.
• 12-week register method. Keep a register of meal entertainment, with costs and recipients, for a continuous 12 weeks. Work out the employee percentage, and apply it to total meal entertainment spending for the FBT year.

The decision to treat benefits as meal entertainment needs to be made by the lodgement date (21 May for the 2025 return in the ATO's 2025 instructions).

Worked example: 50/50 split

From the ATO's 2025 return instructions (Example 18): $4,000 of meal entertainment × 50% = $2,000 taxable value. With GST credits claimable, that is type 1: $2,000 × 2.0802 = $4,160.40 grossed up and $1,955.39 FBT.

Christmas parties and on-premises food

The ATO's common entertainment scenarios page says food and drink consumed by current employees on business premises on a working day carries no FBT. An off-site party, or one that includes partners, is generally exempt only if each person's benefit qualifies as a minor benefit. Costs for clients are not subject to FBT. Entertainment that is not subject to FBT is generally not deductible for income tax.

Meal entertainment and entertainment facility leasing are excluded from reportable fringe benefits unless provided under salary sacrifice (ATO).

Minor benefits exemption

A benefit is exempt where both of these apply (ATO, minor benefits exemption):

• its notional taxable value is less than $300; and
• it would be unreasonable to treat it as a fringe benefit.

The $300 test applies to each benefit separately, including separate but connected benefits (a meal, accommodation and a taxi, for example). The unreasonableness test looks at how frequently and regularly the benefit is given, the total value of identical or similar benefits, and other associated benefits.

The ATO's examples: chocolates and flowers worth $105 on the birth of an employee's child are exempt. Weekly Friday lunches averaging $45 per employee are not, because they are regular and add up.

Otherwise deductible rule

If the employee would have been able to claim an income tax deduction had they paid for the benefit themselves, the taxable value is reduced by the deductible proportion (ATO, reducing your FBT liability). The employer usually supports this with an employee declaration.

Worked example from the ATO's employee declarations page: an employer reimburses an employee's home internet. The employee declares that 40% would be deductible to her. The taxable value is reduced by 40%, so FBT applies to 60%. If the bill was $1,200 for the year, the taxable value would be $720 (our illustration).

From 1 April 2027 the rule cannot be used for salary-sacrificed expense payment benefits that are work-related expenses covered by the new standard deduction, regardless of value. This affects the FBT year starting after the current one.

Reportable fringe benefits

Where an employee's total taxable value of fringe benefits (including benefits to associates) is more than $2,000 for the FBT year, the employer reports the grossed-up amount through Single Touch Payroll (ATO, reportable fringe benefits). The reportable amount always uses the type 2 rate of 1.8868. The ATO's example: $3,500 × 1.8868 = $6,603.

Excluded from reporting: car parking, private use of pooled or shared cars, meal entertainment and entertainment facility leasing (unless salary sacrificed), remote area housing assistance and a few others. An exempt electric car is still reportable, so the notional taxable value needs to be worked out each year.

Worked example: exempt EV, still reportable

An employer provides a battery electric car that meets all four conditions, base value $60,000, available all year in the FBT year ending 31 March 2027, no contributions. The notional taxable value under the statutory formula is $60,000 × 20% = $12,000. No FBT is payable, but the reportable amount is $12,000 × 1.8868 = $22,641.60 (our illustration using the ATO formula and rates).

Lodgement and payment dates

From the ATO's lodging and paying page and the registered agent lodgment program:

Who lodges	Lodge and pay by
Employer lodging itself, or agent lodging on paper	21 May after the end of the FBT year
Tax agent lodging electronically, client on the agent's FBT list by 21 May	25 June after the end of the FBT year

For the year ended 31 March 2025, the ATO's 2025 instructions gave 21 May 2025 and, for electronic agent lodgement, generally 25 June 2025. On the same rules, the year ended 31 March 2026 fell due on 21 May 2026, or 25 June 2026 through an agent, and the year ending 31 March 2027 falls due on 21 May 2027, or 25 June 2027 through an agent where the client is on the agent's FBT client list by 21 May 2027. A due date on a weekend or public holiday moves to the next business day.

An employer registered for FBT with nothing to lodge sends a notice of non-lodgment (NAT 3094) by the date the return would have been due. The FBT return will not be processed until all activity statements, including the March quarter, are lodged.

Employee declarations

An employee declaration is a written statement from the employee supporting a concession, such as the otherwise deductible rule (ATO, employee declarations).

• Obtain all declarations by the FBT return due date, or by 21 May if no return is required.
• Use the appropriate approved form.
• Electronic declarations are accepted where the employee signs electronically, for example through a password-protected payroll system.
• They are not sent to the ATO. Keep them with the employer's records for 5 years.

Record keeping

From the ATO's record keeping for FBT page:

• Keep FBT records for 5 years from the date the return is lodged. If no return is required, the 5 years runs from 21 May.
• Records include logbooks, odometer records, invoices, receipts and employee declarations. Electronic records need to be readily accessible.
• Employers under the record keeping exemption threshold ($10,962 for the year ending 31 March 2027) may be able to base their liability on an earlier base year, provided full records were kept for that base year. Reportable amounts still need to be reported.

To test a car quickly, use the FBT car calculator. Ask Nagaris includes an FBT Advisor skill for working through questions like these (Ask Nagaris).

Questions

What are the FBT gross-up rates for 2026-27?

For the FBT year ending 31 March 2027 the type 1 gross-up rate is 2.0802 and the type 2 rate is 1.8868. The FBT rate is 47%. The same figures applied for the year ending 31 March 2026.

When is the FBT return due?

Employers lodging themselves lodge and pay by 21 May after the FBT year ends. Where a tax agent lodges electronically and the client is on the agent's FBT list by 21 May, the due date is generally 25 June.

Are plug-in hybrids still exempt from FBT?

From 1 April 2025 a plug-in hybrid is not a zero or low emissions vehicle. The exemption only continues where the car was in exempt private use before 1 April 2025 under a financially binding commitment made before that date, and that commitment has not changed.

Does an exempt electric car need to be reported?

Yes. Private use of an exempt electric car is still a reportable fringe benefit, so the employer works out its notional taxable value and reports it where the employee's total passes $2,000.

What is the LCT threshold for fuel-efficient vehicles in 2026-27?

The ATO lists $91,661 for fuel-efficient vehicles for 2026-27, and $91,387 for both 2024-25 and 2025-26.

Is home to work travel in a ute exempt?

Travel between home and work in an eligible vehicle such as a single cab ute or panel van can be exempt, provided any other private use is minor, infrequent and irregular.

Sources

• Fringe benefits tax rates and thresholds (ATO)
• Calculating your FBT (ATO)
• Taxable value of a car fringe benefit (ATO)
• Cars and FBT, print section (ATO)
• How FBT applies to cars (ATO)
• Car fringe benefits tax guide for small business (ATO, NAT 55922)
• Fringe benefits tax return 2025 instructions, print section (ATO)
• Electric cars exemption (ATO)
• FBT on plug-in hybrid electric vehicles (ATO)
• Luxury car tax rate and thresholds (ATO)
• Exempt use of eligible vehicles (ATO)
• Car parking and FBT (ATO)
• Calculating the taxable value of entertainment-related benefits (ATO)
• Common entertainment scenarios for business (ATO)
• Minor benefits exemption (ATO)
• Reducing your FBT liability (ATO)
• Reportable fringe benefits (ATO)
• Lodging your FBT return and paying (ATO)
• Registered agent lodgment program: FBT return (ATO)
• Employee declarations (ATO)
• Record keeping for FBT (ATO)
• Fringe Benefits Tax Assessment Act 1986, compilation No. 97 of 1 July 2026 (Federal Register of Legislation)