Here’s the strange thing about fringe benefits tax: your employer hands you a $10,000 car benefit, and the tax bill isn’t 47% of $10,000. It’s nearly double that. The 47% rate is applied to a grossed-up value — that $10,000 becomes $20,802 for tax purposes, and the actual FBT is $9,777. Once you understand that mechanism, the rest falls into place: who really pays it, why a number appears on your payment summary, and why packaging a car can still be worth it.
This guide covers the 2026-27 FBT rules — the FBT year runs 1 April 2026 to 31 March 2027, separate from the income tax year — with every rate checked against the ATO’s published figures. It also owns the angles the accountant-written guides skip: the gross-up in plain dollars, the $3,773 payment-summary surprise, the employee-contribution trick that wipes FBT to zero, and the announced EV exemption wind-back from 1 April 2027.
The short answer
- FBT is paid by your employer, not you — but you usually fund it through your salary package. The 2026-27 FBT rate is 47%.
- The 47% applies to the grossed-up value, not the face value. Type 1 benefits (GST credit claimable) × 2.0802; Type 2 × 1.8868. A $10,000 car benefit costs $9,777 (Type 1) or $8,868 (Type 2).
- You don’t declare fringe benefits as taxable income. But if the taxable value exceeds $2,000, the grossed-up amount (always at 1.8868 — the ATO’s example: $2,000.01 becomes $3,773) appears on your payment summary and inflates your income for HECS/HELP, Medicare levy surcharge, child support and family assistance tests.
- Salary-sacrificed super into a complying fund is not a fringe benefit — no FBT. But it’s still reported as reportable employer super contributions and counts in income tests.
- Car FBT has two methods: the statutory formula (flat 20% of the car’s base value) or the operating cost method (actual costs × private-use percentage, needs a logbook). The employer uses whichever gives the lower taxable value.
- The EV FBT exemption runs in full until 31 March 2027. An announced (not yet law) wind-back then phases it down to a 25% discount by 1 April 2029.
Two companion reads before you dive in: our Medicare levy surcharge guide (the 2026-27 single threshold is $105,000 — the reportable fringe benefits trap below pushes people over it) and the income tax calculator for modelling your package.
What fringe benefits tax actually is (and who really pays)
FBT is a tax on non-cash benefits employers provide to employees, their families, or associates: company cars, cheap loans, school fees paid by the boss, gym memberships, entertainment. If it’s not cash salary and not super paid into a complying fund, it probably counts.
The legal answer to “who pays?” is the employer — the ATO bills them, they lodge the return. But packaging works by pre-tax deduction: the benefit cost plus the FBT is subtracted from your gross salary before income tax. So a $9,777 FBT bill on your packaged car has effectively cost you $9,777 of pre-tax salary. The employer writes the cheque; the funding comes out of your pay.
The gross-up: why 47% doesn’t mean what you think
This is the part every guide glosses over. FBT mirrors the top marginal rate (45% income tax + 2% Medicare levy = 47%): if your employer had paid cash salary instead, you’d have paid tax on it at up to 47%. So the ATO asks what pre-tax salary you’d have needed to buy the benefit yourself — the “taxable value” — and charges 47% on that. The gross-up factor does the conversion in one step:
- Type 1 (employer could claim a GST credit — e.g. a car purchase): taxable value × 2.0802
- Type 2 (no GST credit — e.g. school fees): taxable value × 1.8868
On a $10,000 benefit: Type 1: $10,000 × 2.0802 = $20,802 → FBT $9,777. Type 2: $10,000 × 1.8868 = $18,868 → FBT $8,868.
That’s why packaging appeals to high earners — you’d have paid 47% on cash anyway — but at lower marginal rates packaging often loses to plain salary, because the FBT rate is always 47%.
Official 2026-27 FBT rates and thresholds
All figures below are for the FBT year 1 April 2026 – 31 March 2027, from the ATO’s FBT rates and thresholds page:
| Item | 2026-27 figure |
|---|---|
| FBT rate | 47% |
| Type 1 gross-up factor | 2.0802 |
| Type 2 gross-up factor | 1.8868 |
| Reportable fringe benefits threshold | Taxable value exceeds $2,000; grossed-up minimum reported $3,773 (always at the lower 1.8868 rate) |
| Car parking daily threshold | $11.48 |
| Loan benchmark interest rate | 8.27% |
| Record-keeping exemption threshold | $10,962 (employers under this FBT liability can skip some records) |
| FBT return due | 21 May self-lodged; 25 June via tax agent |
| Quarterly FBT instalments | Required if prior-year FBT liability was $3,000 or more |
Car fringe benefits: the 20% statutory formula vs the logbook method
Cars are the biggest source of FBT, and they get their own calculation. Two methods; the employer uses whichever gives the lower taxable value.
Statutory formula method
Taxable value = base value × 20% × (days available ÷ 365), minus employee contributions. The 20% is flat regardless of kilometres (since 1 April 2014). On a $50,000 car available all year:
- Taxable value = $50,000 × 20% = $10,000 → Type 1 gross-up $20,802 → FBT $9,777/year
Operating cost method
Taxable value = total operating costs × private-use percentage (fuel, rego, insurance, repairs, depreciation/interest). Requires a 12-week continuous logbook plus odometer records. On the same $50,000 car with $12,000 of annual costs and 40% private use:
- Taxable value = $12,000 × 40% = $4,800 → Type 2 gross-up $9,057 → FBT $4,257/year
A $5,500-a-year difference on the same car — so anyone packaging a car with heavy business use should ask which method is being applied. The logbook method wins when private use is low; the statutory formula wins for mostly-private, cheap-to-run cars.
The EV FBT exemption wind-back: what actually changes (proposed)
The electric car discount — the full FBT exemption for eligible EVs — is why novated leasing an EV became Australia’s favourite tax play. The timeline, per the 2026-27 Budget and the ATO’s EV discount page. Important: this is not yet law — an exposure-draft bill (consultation closed 28 September 2026), with the grandfathering details being contested by CPA Australia, CA ANZ and the NTAA.
- Now until 31 March 2027: full exemption for eligible EVs under the luxury car tax threshold ($91,661 for fuel-efficient vehicles in 2026-27). Nothing changes.
- 1 April 2027 – 31 March 2029: EVs at $75,000 or less keep the full exemption; EVs between $75,000 and the LCT threshold drop to a 25% FBT discount.
- From 1 April 2029: every eligible EV gets the 25% discount. Existing leases are slated to be grandfathered — but exactly what counts as “committed before 1 April 2027” is under dispute.
Also note: plug-in hybrids lost eligibility for new leases on 1 April 2025 — older guides listing PHEVs as exempt are out of date.
The $3,773 surprise: reportable fringe benefits and the income-test trap
Here’s the piece that ambushes employees every July. If the total taxable value of your fringe benefits exceeds $2,000 in the FBT year, your employer must report the grossed-up amount on your income statement — at the lower 1.8868 rate no matter what type the benefits were. The ATO’s own example: $2,000.01 of benefits becomes a $3,773 reportable fringe benefits amount (RFBA).
Crucially: the RFBA is not assessable income. But it is added to your “adjusted taxable income” for HECS/HELP repayments, the Medicare levy surcharge, child support and family assistance tests. Our HECS repayment guide walks through how repayment income is calculated, and the RFBA feeds straight into it.
The trap, worked: you’re single, earn $102,000 salary, have no private hospital cover, and salary-package $2,500 of benefits (taxable value).
- RFBA = $2,500 × 1.8868 = $4,717 on your payment summary
- Your income for Medicare levy surcharge purposes = $102,000 + $4,717 = $106,717
- The 2026-27 single MLS threshold is $105,000 — you’ve crossed it
- Result: 1% surcharge on $106,717 ≈ $1,067, payable at tax time, for a packaging arrangement you thought was saving you money
And the fix packaging-savvy employees use: the employee contribution method (ECM). Pay part of the benefit yourself with post-tax dollars and the taxable value falls dollar-for-dollar. A $6,000 car benefit (Type 2) left alone attracts $6,000 × 1.8868 × 47% ≈ $5,321 of FBT; a $6,000 post-tax employee contribution takes the taxable value to $0 — zero FBT, and with nothing over the $2,000 reporting threshold, nothing appears on your payment summary at all. The catch: it comes out of after-tax pay, so it mainly pays off when your marginal rate is close to the 47% FBT rate.
Exemptions: the benefits that escape FBT entirely
Minor benefits and work-related items
A benefit is exempt if it costs less than $300 (GST-inclusive), is infrequent and irregular, and it would be unreasonable to treat it as a fringe benefit — the annual Christmas party is the textbook example. But it’s tested per benefit, per person, and “infrequent” does real work: a $299 monthly gym membership is not irregular, so it doesn’t qualify. Laptops, phones, tablets, portable printers, tools of trade and protective clothing provided primarily for work are also exempt — and the ATO has removed the old one-item-per-year limit for same-function devices, so two genuinely work-use laptops in a year can both be exempt.
Salary-sacrificed super (the important non-exemption)
Contributions to a complying super fund are not a fringe benefit at all — zero FBT. That’s the cleanest packaging available. But two traps: the sacrificed amount is reported as reportable employer super contributions (RESC) and counts in the same income tests as RFBA (MLS, HECS, child support). And contributions for your spouse or to a non-complying fund are fringe benefits. Check your position against our super contribution caps guide before ramping up salary sacrifice. For a sense of scale: $10,000 salary-sacrificed into your complying fund = $0 FBT. $10,000 of school fees paid by your employer = roughly $8,868 FBT (Type 2). Same $10,000 out of your package, wildly different tax.
Car parking and not-for-profits
Employer-provided parking near work is generally a fringe benefit — unless it’s not a commercial car park, or the small-business exemption applies. The daily threshold for 2026-27 is $11.48: if the cheapest all-day commercial parking within a kilometre is at or below that, there’s no taxable parking benefit. Not-for-profits get their own concessions: public benevolent institutions and health promotion charities get an FBT exemption capped at $30,000 grossed-up per employee; public hospitals get $17,000; meal entertainment packaging is capped at $5,000; and rebatable employers get a 47% FBT rebate — which is why packaging is so generous in the charity and health sectors.
Novated leases, end to end
A novated lease is a three-way agreement between you, your employer and a finance company: the employer takes over your lease payments and deducts them from pre-tax salary, FBT is calculated on the car benefit, and ECM is typically used to reduce FBT to zero. The RFBA still lands on your payment summary even though no FBT was paid.
Before you sign, hear the common complaints: lease finance rates around 14% versus ~7% for a straight car loan, bundled fees of a few thousand a year eroding the tax saving, and the job-change problem — a new employer must agree to take on the novation, and contracts can contain base-value adjustments that sting on exit. Lenders also treat the packaged amount as a committed expense, denting home-loan borrowing capacity. Novated leasing usually wins for high earners with the EV exemption in play; for everyone else, compare against a plain loan first.
Common mistakes
- Thinking the 47% applies to the face value. It applies to the grossed-up value. Budget for roughly double what “47% of the benefit” suggests.
- Treating the RFBA as taxable income. It isn’t — but it inflates HECS, MLS, child support and FTB income tests, which is worse in some cases.
- Assuming salary-sacrifice super is invisible. No FBT, but RESC reporting means it still counts toward income tests (and contribution caps).
- Skipping the logbook. Without a valid 12-week logbook plus odometer records, you’re stuck with the 20% statutory formula even if your private use is tiny.
- Missing the dates. The FBT year ends 31 March, not 30 June — a trap for anyone doing end-of-year packaging planning. Returns are due 21 May (self-lodged) or 25 June (via agent).
- Assuming every EV still qualifies. PHEVs lost the exemption for new leases from 1 April 2025, and the phase-down from 1 April 2027 is already announced.
FAQ
Do I pay fringe benefits tax as an employee?
No — FBT is legally your employer’s tax, and your employer lodges the return. But under salary packaging, the benefit cost plus the FBT is deducted from your pre-tax salary, so economically it comes out of your pay. The other cost to you is the income-test consequences of the reportable amount on your payment summary.
Does the reportable fringe benefits amount increase my taxable income?
No. The RFBA is not assessable income and you pay no income tax on it. But it’s added to your adjusted taxable income for HECS/HELP repayments, the Medicare levy surcharge, child support assessments, family assistance and some tax offsets. That $3,773 number on your payment summary can easily cost you $1,000+ in surcharge or extra HECS — see the worked example above.
Is salary-sacrificed super a fringe benefit?
Not when it’s paid into a complying super fund — the law specifically excludes it, so there’s no FBT. It is, however, reported as reportable employer super contributions (RESC) and counted in income tests. Contributions your employer makes for your spouse, or to a non-complying fund, are fringe benefits.
When is the FBT year?
1 April to 31 March — deliberately different from the 1 July–30 June income tax year. The 2026-27 FBT year runs 1 April 2026 to 31 March 2027, with returns due 21 May 2027 if you lodge yourself or 25 June 2027 through a tax agent.
Is the EV FBT exemption actually ending?
Not immediately, and not entirely. The full exemption runs to 31 March 2027. From 1 April 2027 the announced (but not yet legislated) change keeps the full exemption only for EVs at $75,000 or less, with a 25% FBT discount for EVs between $75,000 and the luxury car tax threshold. From 1 April 2029 every eligible EV gets the 25% discount. Existing leases are slated to be grandfathered, but the draft transitional rules are still being contested — verify any commitment date with an adviser.
The bottom line
Fringe benefits tax looks intimidating because the rate is high and the year is weird, but the whole system reduces to three ideas: the 47% applies to a grossed-up value (2.0802 or 1.8868), anything over $2,000 of taxable value lands on your payment summary as a grossed-up number that feeds income tests, and salary-sacrificed super into a complying fund sidesteps FBT entirely. Get those three right and you can read any packaging quote — car, novated lease, or otherwise — and know exactly what it’s costing you. Figures above are general information for the 2026-27 FBT year, not personal advice — for a lease or a large packaging arrangement, a licensed adviser earns their fee.
