FBT changes for salary sacrificed work-related benefits from April 2027

FBT changes for salary sacrificed work-related benefits

From 1 April 2027, the Fringe Benefits Tax (FBT) treatment of some salary sacrificed work-related benefits will change.

Changes to FBT will affect employers that provide certain salary sacrificed work-related benefits to their employees.

If you provide salary sacrifice work-related benefits that are currently exempt from FBT or eligible for a reduced FBT liability, Flor-Hanly can help you understand the potential implications of these changes.

The 'otherwise deductible rule' and salary sacrificed benefits

Employers will no longer be able to use the 'otherwise deductible rule' to reduce their FBT liability for expense payment fringe benefits that are:

• work-related
• covered by the standard deduction, and
• provided through a salary sacrifice arrangement.

This includes when employers reimburse or make a payment for work-related expenses, such as:

• home office expenses
• home phone or internet expenses
• self-education expenses.

Employers can continue to use the otherwise deductible rule to reduce their FBT liability for expense payment fringe benefits that:

• aren't covered by the standard deduction
• are covered by the standard deduction but aren't provided under a salary sacrifice arrangement.

FBT exemptions for some salary sacrificed items

Certain work-related items will no longer be exempt from FBT when provided through a salary sacrifice arrangement, including:

• portable electronic devices
• computer software
• protective clothing
• briefcases
• tools of trade.

Substantially identical function exemption

Employers will be able to provide employees with more than one eligible work-related item in an FBT year, even if it has the same or substantially identical function and continue to receive the exemption, where the items:

• are mainly used for work purposes; and
• are not provided through a salary sacrifice arrangement.

This removes the current limit of one exempt item per employee per FBT year and extends the exemption to all employers, not just small businesses.

Supporting our employer clients

We can help employers stay compliant by reviewing any work-related benefits you provide to employees, by helping you understand:

• how these changes affect your FBT position and the amount of FBT you'll need to pay
• what records to keep
• how to calculate FBT liability correctly
• your lodgement and payment obligations for the 2027–28 FBT year.

Call Flor-Hanly on 07 4963 4800 for fringe benefits tax help and advice.

Source: Australian Tax Office