Fringe benefits have become a defining feature of the modern Australian workplace, offering perks that go beyond salary. Whether it’s a company car, salary packaging, or novated leases, these extras can boost employee satisfaction and help businesses attract top talent. But with the new financial year in full swing, both employers and employees need to keep a close eye on changing fringe benefits tax (FBT) rules, especially as the ATO ramps up compliance efforts in 2025.
What Exactly Are Fringe Benefits?
Fringe benefits are non-cash perks provided to employees (or their associates) because of their employment. These can include:
- Company vehicles for private use
- Low-interest loans
- Expense payments (e.g., school fees, childcare)
- Entertainment (meals, tickets, holiday accommodation)
- Salary packaging arrangements (superannuation top-ups, laptops)
- Housing or living-away-from-home allowances
Unlike regular wages, most fringe benefits are subject to a separate tax—FBT—which is paid by the employer, not the employee. The rules around what is and isn’t taxed can be complex, and there are important exemptions and concessions available for certain industries and types of benefits.
2025 Updates: What’s Changed for FBT?
The 2024–25 financial year has brought several notable changes and clarifications to FBT administration and reporting, driven by the ATO’s focus on closing compliance gaps and encouraging fairer, greener workplaces:
- Electric Vehicles (EVs): The government’s FBT exemption for eligible electric cars, first introduced in 2022, continues in 2025. However, the eligibility threshold has been indexed to $91,000 (GST inclusive) for the 2024–25 year. Businesses providing EVs above this cap will now need to account for FBT, while those within the cap enjoy significant tax savings.
- Remote Work and Home Office Perks: With hybrid work here to stay, the ATO has clarified the treatment of home office equipment and reimbursements. Laptops, monitors, and even ergonomic chairs provided primarily for work use may be exempt if they meet minor benefit or portable electronic device rules. However, ongoing reimbursement of home internet or utility bills is generally still a taxable benefit unless strict documentation is kept.
- Salary Packaging Tightening: The ATO is scrutinising salary sacrifice arrangements, especially where benefits blur the line with ordinary wages. Employers must ensure these arrangements are properly documented and comply with the latest standards to avoid penalties.
- Reporting Enhancements: Single Touch Payroll (STP) Phase 2 means more detailed reporting of fringe benefits through payroll software. Employees may now see reportable benefits on their income statements sooner, impacting their government entitlements or HELP repayments.
Smart Strategies for Navigating Fringe Benefits in 2025
Given the complexity—and the opportunities—of the current FBT landscape, here are some practical tips for both employers and employees:
- Employers:
- Review your benefits offering annually to ensure tax efficiency and compliance.
- Take advantage of FBT exemptions and concessions, especially for EVs, work-related devices, and minor benefits under $300.
- Ensure robust record-keeping for all benefits provided, including logbooks for vehicles and receipts for expense payments.
- Educate staff about the potential impact of reportable fringe benefits on their taxable income and government benefits.
- Employees:
- Ask your employer about salary packaging options—super top-ups, portable electronics, and novated leases can boost your take-home value.
- Be mindful of the ‘reportable fringe benefits’ figure on your income statement, as it can affect family tax benefits, childcare subsidies, and HELP debt repayments.
- If using a company car, keep a detailed logbook to support business-use claims and potentially reduce FBT liability.
The Road Ahead: Compliance and Opportunity
With the ATO’s data-matching capabilities expanding and FBT remaining a key revenue source, businesses can expect greater scrutiny in 2025. But with that scrutiny comes opportunity: smart, compliant fringe benefit strategies can help employers stand out in a competitive talent market and deliver real value to staff.
Staying informed, leveraging available exemptions, and keeping meticulous records are the keys to making the most of fringe benefits this financial year and beyond.
