Fringe benefits tax (FBT) is one of the areas where the line between the bookkeeper's role and the tax agent's role is most easily blurred — and where miscoding creates problems that can take years to unwind. The confusion stems partly from the fact that FBT touches both the activity statement and the separate FBT return, and partially from the complex valuation rules that determine what FBT is payable.
This guide clarifies what bookkeepers need to know about FBT, focusing on the coding and reconciliation tasks that fall within a BAS agent's scope.
What FBT is (a brief orientation)
FBT is a tax paid by employers on the taxable value of non-cash benefits provided to employees (and their associates) in connection with employment. Common examples include:
- Car benefits (private use of a company-owned or leased vehicle)
- Car parking benefits
- Expense payment benefits (paying an employee's personal expense, e.g., gym membership)
- Living-away-from-home allowances
- Entertainment benefits (meals, events provided to employees)
- Low-interest loans to employees
FBT is payable by the employer, not the employee. The FBT rate is currently 47% (aligned with the top marginal tax rate) applied to the grossed-up taxable value of the benefits.
The FBT year runs from 1 April to 31 March — a different year to the income tax year (1 July to 30 June). The FBT return is due on 21 May following the end of the FBT year (or later if lodged by a registered tax agent).
FBT and the activity statement: what appears where
This is the most critical distinction for bookkeepers:
The FBT return is NOT the BAS. The FBT return is a separate ATO form lodged by a registered tax agent (not a BAS agent). BAS agents cannot prepare or lodge FBT returns.
However, FBT does appear on the BAS in one specific place: the F label on the activity statement reports the FBT instalment obligation for employers who pay FBT quarterly rather than annually.
| Label | What it represents |
|---|---|
| F | FBT instalment payable for the quarter (quarterly payers only) |
Most employers with an FBT liability are quarterly instalment payers — they pay FBT in quarterly instalments (like PAYG instalments) based on the prior year's FBT liability, with a true-up at annual lodgement.
Bookkeepers managing the BAS need to:
- Include the F instalment amount on the BAS
- Code the resulting bank payment as an FBT expense (not a GST transaction)
Tax agents handle:
- Calculating the actual FBT liability based on benefit valuations
- Preparing and lodging the FBT return
- Advising the employer on benefit structuring and FBT minimisation strategies
How to code FBT transactions in bookkeeping
Quarterly FBT instalment payments
When a client pays their quarterly FBT instalment to the ATO:
- Account: FBT Expense (e.g., 6-2200) or Tax Payable — FBT (2-2500 depending on how the liability is handled in the Chart of Accounts)
- GST code: N-T (FBT payments to the ATO are not subject to GST)
- Bank description: Typically appears as "ATO FBT INSTALMENT" or similar
Annual FBT top-up payment (or refund)
When the annual FBT return is lodged and a top-up payment is required:
- Same account coding as quarterly instalments
- Check with the tax agent whether the annual return increased, matched, or reduced the instalment payments made during the year
- If the ATO refunds excess instalments (because actual FBT was lower than the prior year's instalments), code the refund as a credit to FBT Expense
Car fringe benefits: the employer's contribution
For company-owned or novated-lease vehicles, the employer may deduct an employee contribution from the taxable value. The employee contributes to reduce the FBT payable — typically through after-tax salary deductions.
Code employee contributions received from the employee's salary as a reduction to FBT Expense. This is a book entry, not a cash transaction — the "contribution" is reflected in the net salary payment rather than a separate cash receipt.
Expense payment benefits
When the employer pays an employee's personal expense (gym, health insurance, school fees) on their behalf:
- Code the expense to the relevant FBT Benefit account, not to the employee benefit or salary account
- The full gross-up value will be calculated by the tax agent for FBT return purposes
- Ensure the payment is separately identifiable in the ledger — the tax agent cannot value it if it's buried in a general salaries account
The GST-FBT interaction: input tax credits and Type 1 benefits
There is an important GST interaction that affects how FBT is calculated, though it's primarily the tax agent's concern. Bookkeepers need to understand the basics to code correctly.
FBT benefits come in two types for grossing-up purposes:
Type 1 benefits: Benefits where the employer is entitled to claim an ITC on the GST included in the benefit's cost. The gross-up rate for Type 1 benefits is higher (2.0802 in 2026) because the employee is getting a GST-free benefit while the employer claimed the ITC.
Type 2 benefits: Benefits where the employer is not entitled to an ITC (because the benefit is input-taxed, exempt from GST, or the employer is not registered for GST). The gross-up rate is lower (1.8868).
For the bookkeeper, this means:
Do claim the GST ITC on employer-purchased benefits that qualify as Type 1 (e.g., purchases made for an employee's private vehicle use where the employer is registered for GST). Code these as GST with full ITC.
Do not claim the GST ITC on benefits that are input-taxed or where the ITC is specifically not available. Code these as N-T.
The tax agent will need to know which benefits were Type 1 vs Type 2 to apply the correct gross-up rate. Provide them with a categorised list of benefits from the ledger, not a single aggregated total.
Common FBT bookkeeping mistakes
1. Booking car benefits as business vehicle expenses
A company car used partly for private purposes by an employee creates an FBT liability. The running costs of the vehicle (fuel, servicing, rego, insurance) should still be coded as vehicle expenses with GST ITC claimed. But the FBT payable on the private use component is a separate FBT expense — not a vehicle expense.
Booking everything to the vehicle expense account and ignoring the FBT creates an understated tax liability and a confused ledger when the tax agent tries to calculate the FBT return.
2. Coding entertainment to COGS or general expenses
Employee entertainment (meals, sporting events, social functions) is a common and problematic category. Entertainment provided to employees may create an FBT liability. Entertainment provided to clients is generally not subject to FBT (clients are not associates) but is not deductible for income tax.
Code employee entertainment to a separate "Entertainment — staff" account. Code client entertainment to "Entertainment — client". This separation lets the tax agent apply the correct FBT and deductibility treatment to each category.
3. Claiming ITC on entertainment
With limited exceptions (entertainment provided to associates of employees where FBT is paid), entertainment expenses are not entitled to an ITC. Coding a restaurant meal for staff as GST and claiming the ITC is a common error.
The correct code for most entertainment is N-T (no GST ITC claimable, even though the supplier charged GST).
4. Treating salary sacrifice as a deductible benefit
Salary sacrificed by an employee (where the employee accepts a lower salary in return for a benefit) reduces the employer's wages liability — but does not make the benefit deductible. The employer still pays FBT on the sacrificed benefit (unless it's a concessionally taxed benefit such as salary sacrificed super or an exempt vehicle).
What bookkeepers should flag to the tax agent
At minimum, before the end of each FBT year (31 March) and before the FBT return is due (21 May), bring the following to the tax agent's attention:
- Any company-owned or novated-lease vehicles used by employees
- Any employer-paid expenses that may be personal (gym, health insurance, phone plans)
- Any interest-free or low-interest loans made by the employer to employees
- Any living-away-from-home arrangements
- Any entertainment coded during the year (amounts and whether provided to staff or clients)
The tax agent will determine which of these create FBT liabilities, calculate the taxable value, and prepare the return. The bookkeeper's role is to ensure the ledger is clear enough that the tax agent can do that accurately.
This article was last reviewed on 27 May 2026. FBT rates and rules are updated annually. Always confirm current rates and legislation at ato.gov.au/fbt. This is general guidance, not specific tax or legal advice.