30 SEPTEMBER 2026 • 1 MIN READ
FBT changes for work-related benefits
The ATO has recently confirmed changes to the FBT treatment of salary sacrificed work-related benefits effective from 1 April 2027. These changes will impact employers who currently rely on FBT exemptions and may require a review of existing salary packages before the start of the 2028 FBT year.
What’s changing
The otherwise deductible rule for reducing FBT liability
Currently, employers can reduce their FBT liability on benefits provided under a salary sacrifice arrangement where the employee would otherwise be entitled to claim the expense as an income tax deduction (if they had paid for the expense directly themselves). For example, home office expenses, home phone or internet expenses, and self-education expenses.
From 1 April 2027, employers will no longer be able to apply that otherwise deductible rule where the benefit is:
- Work-related
- Covered by the proposed standard deduction for eligible individual taxpayers (i.e. the instant deduction of up to $1000 for work-related expenses)
- Provided through a salary sacrifice arrangement
Removal of FBT exemptions for certain salary sacrificed work-related items
From 1 April 2027, certain items that are currently exempt from FBT when provided through a salary sacrifice arrangement will no longer be exempt. This includes:
- Portable electronic devices
- Computer software
- Protective clothing
- Briefcases
- Tools of trade
This is a big change which means employers that currently allow these types of salary sacrifice arrangements may need to reconsider whether other forms of remuneration or salary packaging would be a better option.
Work-related items not provided through salary sacrifice
Currently, businesses with an aggregated turnover of more than $50 million are limited to providing only 1 FBT-exempt work-related item per employee each FBT year, where the items have the same or substantially identical function and are not provided through salary sacrifice.
From 1 April 2027, this limit will be removed. This means that businesses will be able to provide multiple work-related items to an employee (e.g. a work phone and laptop) and those items will be FBT-exempt as long as they’re provided directly and not through a salary sacrifice arrangement.
What to do now
Although the changes aren’t coming in until next year, it pays to start reviewing current salary packages and understanding the impact these tax changes will have on your business.
If you think your business might be impacted, you should:
- Audit your current salary arrangements to identify which employees are currently salary sacrificing work-related benefits that will lose their FBT exemption.
- Discuss any potential financial impacts with your accountant so you know what these changes would cost your business.
- Consider whether alternative arrangements would be better suited.
- If you decide to switch affected employees to an alternative salary package, prepare communications and be transparent about what’s changing and why.
If you’d like to discuss how these changes might affect your business, get in touch with your Beany accountant.
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