Fringe Benefits Tax – Are you ready for the 2023 FBT Season?

05 April 2023

As the end of the 2023 FBT year has arrived, we provide you with the latest updates and tips to ensure you are ready for the 2023 FBT return preparation season. 

2023 FBT Rates and Thresholds

Key Dates

Who needs to lodge an FBT Return?

Employers who have an FBT liability must lodge an FBT Return.

If FBT instalments were paid during the year and the employer does not have an FBT liability for the year, an FBT return must be lodged to obtain a refund of the FBT instalments.


  • If an employer does not have an FBT liability, we recommend that an FBT return is lodged to ensure commencement of the three-year amendment period for which the Commissioner can generally amend FBT returns.

ATO Audit Activity

The ATO have announced increased FBT audit activity in respect of employers who are not declaring fringe benefits and paying the correct amount of FBT. The ATO suggests that the ‘tax gap’ for underpaid FBT is around 20% of the overall FBT which should be payable, which is mainly attributable to employers who are not participating in the FBT system when they provide benefits to employees.

The ATO’s view is that many employers:

  • Do not fully understand the FBT rules and their FBT obligations;
  • Are failing to retain the appropriate documentation to reduce the taxable value of fringe benefits (eg declarations and documentary evidence);
  • Are treating vehicles as ‘exempt vehicles’ for FBT purposes when the vehicles do not satisfy the exempt vehicle criteria;
  • Are incorrectly failing to include benefits provided to ‘contractors’ who should in fact be classified as employees.

With increasing ATO activity, careful attention must be given to FBT compliance and lodgement of correct FBT returns, on the same basis as other tax liabilities.

Recent Developments

1.     FBT exemption for electric cars

In a bid to promote the adoption of electric vehicles, the Government has introduced an FBT exemption for qualifying electric cars.

For the exemption to apply, the following conditions must be satisfied:

  • The car is a ‘zero or low emission vehicle’, ie certain battery electric vehicles, hydrogen fuel cell electric vehicles and plug-in hybrid electric vehicles;
  • The car benefit was provided to a current employee on or after 1 July 2022;
  • The car is first held and used on or after 1 July 2022; and
  • No amount of luxury car tax has become payable in respect of the car (the luxury car tax threshold for fuel efficient vehicles is currently $84,916).

Unless the transitional requirements are satisfied, the exemption for plug-in hybrid vehicles will cease for car benefits provided from 1 April 2025.


  • The rules for the exemption for electric cars are very specific and should be carefully considered to ensure the exemption is available.
  • Electric cars which are exempt are still required to be disclosed as a reportable fringe benefit. Therefore, the same record keeping rules that currently apply to car fringe benefits also apply to electric cars.
  • Electric cars can be salary packaged by employees.

Be on the lookout for our detailed newsletter on the electric car exemption to be released next week.

2.     Commercial car parking – expanded definition

From 1 April 2022, updated Taxation Ruling TR 2021/2: Car Parking Benefits will apply whereby the ATO has broadened its view of the definition of a ‘commercial parking station’ to include ‘special purpose’ car parking facilities such as shopping centres, hospitals, universities and airports.  

Employers who provide car parking to employees that is located within one kilometre of a special purpose car parking facility may now be subject to FBT on such car parking benefits.


  • Where employers provide car parking outside of the CBD (ie business premises located in the suburbs), the treatment of the parking should be reviewed as there may now be commercial parking stations within the one kilometre radius.
  • If the lowest fee charged by the commercial parking station for all day parking is $9.72 or less on 1 April 2022, a fringe benefit does not arise.
  • Where parking provided to an employee is not in a commercial parking station, employer entities with an aggregated turnover of less than $50 million for the year ended 30 June 2022 may be eligible for the small business car parking exemption provided the other exemption criteria are satisfied.

3.     Employees versus Contractors

Distinguishing between employees and contractors is important in the context of FBT (as well as PAYG Withholding and Superannuation obligations), as FBT is payable in respect of employees (and their associates) but not contractors. Where employers incorrectly classify individuals as contractors, an FBT liability and penalties can arise if the ATO conducts a review and concludes the individuals are in fact employees.

Two important High Court decisions were handed down in 2022 which clarified the ordinary or common law meaning of ‘employee’, being the Personnel Contracting[1] and Jamsek[2] cases.

Broadly, the High Court‘s view is that where the terms of the parties’ relationship is comprehensively committed to a written contract, the status of the worker should be determined based on the legal rights and obligations in the contract. Further, the ‘totality of rights’ in the contract should be used to determine who has the right to exercise control over the person’s work and therefore whether the person is working in the payer’s business.

The ATO subsequently released Draft Taxation Ruling TR2022/D3: Income Tax: Pay As You Go Withholding – Who is an Employee and Draft Practical Compliance Guideline PCG 2022/D5: Classifying Workers as Employees or Independent Contractors – ATO Compliance Approach to provide guidance on classifying a worker as an employee or an independent contractor.

  • [1] CFMMEU v Personnel Contracting Pty Ltd 2022] HCA 1
  • [2] ZG Operations & Anor v Jamsek & Ors [2022] HCA 2


  • Employers should review their existing and new contracts with individuals to ensure the legal rights under the contract give effect to the desired classification of workers.
  • Under the PCG, the arrangement is more likely to be considered low risk and the ATO will not devote audit resources where:
    • There is evidence that both parties agree on the classification;
    • Performance of the arrangement has not deviated significantly from the agreed contractual rights;
    • Specific advice was sought by the payer confirming the correct worker classification; and
    • The payer is meeting the correct tax, superannuation and reporting obligations based on the correct classification.
  • Seek advice to ensure that your assessment of contractors can be supported or whether the business faces tax risk which should be addressed.

4.     Entertainment expenses – ‘Frequent’ Benefits

Entertainment benefits provided to employees are steadily increasing now that Covid restrictions have eased and more employees are travelling again. These benefits require careful analysis in respect of each employee to ensure the correct treatment for FBT purposes.


  • The minor benefits exemption for expenses less than $300 (including GST) only applies where the benefits are ‘irregular and infrequent’. Therefore, where an employee is regularly provided with entertainment benefits (eg client lunches and dinners), the minor benefits exemption is unlikely to apply.
  • The ‘actual method’ for determining entertainment fringe benefits commonly results in a better outcome for employers (rather than the ‘50/50 method’). The minor benefits and property on workday exemptions are not available if using the 50/50 method to calculate entertainment fringe benefits. (Note: the actual method requires more detailed record keeping regarding who attended each event).
  • Entertainment expenses which are not subject to FBT are not deductible for income tax purposes and GST credits cannot be claimed.

5.     Proposed Record Keeping Concessions  

A series of exposure drafts have been released with the aim of simplifying FBT record keeping and reducing compliance costs for employers who maintain good records in relation to travel diaries and certain relocation transport expenses.

These proposed rules are not yet law and will likely apply from 1 April 2023 (ie the 2024 FBT year).

The rules allow employers to rely on alternative records where certain conditions are met, rather than obtaining travel diaries and declarations in what appear to be quite limited circumstances.

As such, recordkeeping remains critical for the reduction of FBT for the 2023 FBT year.

Next steps

If you would like further information on FBT, employment taxes or assistance with your FBT obligations, please contact the authors of this article.

Contact the Author:

Rachel Pritchard
Associate Director
Head of Human Capital & Corporate

Amy Carter
Senior Consultant
Human Capital & Private Client Groups

Mikaella Hooker
Senior Consultant
Corporate & Private Client Groups

This newsletter is current as of 05 April 2023, however, please note that announcements and changes are being made by the Government and the ATO regularly.  Before acting upon the content of this newsletter, please contact us to discuss how the above applies to your specific circumstances.

This information is general advice only and neither purports, nor is intended to be advice on any particular matter.
No responsibility can be accepted for those who act on the contents of this publication without first contacting us and obtaining specific advice.
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