As part of supplying the Business Planning Hobart businesses need, we thought we should give you some early warning about important Fringe Benefits Tax (FBT) changes. From 1 April 2027, the tax treatment of several commonly provided employee benefits will change.
For employers in Hobart and across Tasmania, there is plenty of time to prepare — but it makes sense to understand what is changing and review your existing arrangements before the new rules begin.
What Is Changing With Salary-Sacrificed Expenses?
Under the current rules, employers may be able to use what is known as the “otherwise deductible” rule to reduce their FBT liability for certain work-related expenses.
From 1 April 2027, this will no longer be available for salary-sacrificed work-related expense payment benefits that are covered by the new standard deduction.
These can include expenses such as:
- home office expenses
- home phone and internet expenses
- self-education expenses.
Importantly, the change specifically relates to benefits provided under a salary sacrifice arrangement. The otherwise deductible rule can continue to apply to eligible expense payment fringe benefits that are not provided through salary sacrifice.
What About Work-Related Items?
There are changes here too.
Certain work-related items that may currently qualify for an FBT exemption will no longer be exempt when provided through salary sacrifice from 1 April 2027.
These include:
- portable electronic devices
- computer software
- protective clothing
- briefcases
- tools of trade.
However, eligible work-related items can remain exempt when they are not provided as part of a salary sacrifice arrangement.
That distinction is important — and it’s one of the reasons employers may want to review how their employee benefits are currently structured.
There Is Some Good News Too
Not every change increases the potential FBT bill.
From 1 April 2027, employers will be able to provide employees with more than one eligible work-related item with the same or substantially identical function during an FBT year and still receive the exemption.
The items must be mainly used for work purposes and cannot be provided through salary sacrifice.
This removes the current restriction of one exempt item per employee per FBT year and extends the exemption to all employers, rather than just small businesses.
What Should Employers Do Now?
The new rules don’t begin until April 2027, so there is time to prepare. However, the ATO is already recommending that employers review the salary-sacrificed work-related benefits they provide.
This is also a good opportunity to make sure your FBT calculations, records and reporting arrangements are in order.
The finer details matter. Whether a particular benefit attracts FBT can depend on what you provide, how it is provided and the arrangement you have with the employee.
If your business provides salary-sacrificed work-related benefits, talk to Hills Accounting about your current arrangements. We can help you understand how the changes may affect your business and whether you need to do anything differently before 1 April 2027.
Further Information
The Australian Taxation Office has more information about the upcoming changes:
ATO – FBT changes for salary sacrificed work-related benefits
Remember, this article is general in nature and doesn’t take into account your specific objectives, financial situation, or needs.
For advice tailored to your circumstances, have a chat with us at Hills Accounting Hobart.
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