An employee with a salary-packaged car gets a number on their income statement in July that they did not earn, cannot spend, and are not taxed on. It is usually several thousand dollars. It is the first they have heard of it, and the question lands on you.
That number is the reportable fringe benefits amount. Understanding what it is takes five minutes. Explaining it to someone whose family payments just got reassessed because of it takes considerably longer, which is why the explanation is better given in advance.
The Threshold Is $2,000
You only report where the taxable value of an employee's fringe benefits for the FBT year exceeds $2,000. Below that, nothing goes on the income statement at all.
Once you cross it, you report the grossed-up figure, not the $2,000. At the reporting gross-up rate of 1.8868 that makes $3,773 the smallest amount that ever appears. There is no phase-in: an employee at $1,990 of taxable value reports nothing, and one at $2,010 reports $3,792.
Two details decide who is over the line.
- Per employee, not per business. The test runs separately for each employee. Five employees with $1,500 of benefits each produce no reporting. One employee with $7,500 produces a reported amount of $14,151.
- Associates count. A benefit provided to an employee's spouse or child is treated as provided to the employee and counts towards their threshold.
The taxable value is the figure after any reductions you are entitled to, including employee contributions. An employee who contributes towards the running cost of a packaged car reduces the taxable value dollar for dollar, and a large enough contribution takes them under $2,000 and out of reporting altogether.
Always the Lower Gross-Up Rate
This is the point most explanations get backwards, so it is worth stating precisely.
Calculating your FBT liability uses two gross-up rates. Type 1, currently 2.0802, applies to benefits where you were entitled to a GST credit. Type 2, currently 1.8868, applies where you were not.
For the reportable amount, you use the Type 2 rate of 1.8868 for everything. Every benefit, regardless of whether you claimed a GST credit on it.
So a packaged car on which you claimed GST credits is grossed up at 2.0802 when you work out the tax you owe, and at 1.8868 when you work out the number that goes on the employee's income statement. The two figures are different on purpose, and an employee who tries to reconcile them will not be able to.
The reason is that the reported figure is meant to approximate the gross salary the employee would have needed to earn to buy the benefit themselves after tax. GST recovery is your position, not theirs, so it is excluded.
The Timing Trips Everyone Up
The FBT year runs 1 April to 31 March. The income year runs 1 July to 30 June. They do not line up, and the reportable amount sits across the join.
The amount you report on an employee's income statement for the year ended 30 June 2026 is their reportable amount for the FBT year ended 31 March 2026. So a benefit provided in, say, May 2025 shows up on the income statement issued in July 2026, fourteen months later.
Mechanically it works like this: you finalise the FBT year at 31 March, calculate each employee's reportable amount, and report it through Single Touch Payroll as part of the finalisation you make by mid-July for the income year ending that 30 June.
Two practical consequences.
- An employee who left in February still has a reportable amount. Benefits provided before they left belong to that FBT year, and the amount attaches to the income statement for the income year in which they were employed.
- Stopping a benefit does not stop the reporting for a year. An employee who hands the car back in April 2026 still carries the reportable amount from the year ended 31 March 2026 on the income statement they receive in July 2026.
Not Taxed, But It Still Costs Them
The reported amount is not included in taxable income. Your employee pays no income tax on it and it does not affect their marginal rate. It is not, however, harmless, because it forms part of their adjusted taxable income, and adjusted taxable income is what most means tests actually use.
Where it bites:
- HELP and student loan repayments. Repayment income includes the reportable amount. From 2026-27 repayments are calculated marginally, starting at $69,528, then 15% on income between that and $129,717, and $9,028.35 plus 17% above it. A $14,000 reportable amount on a $75,000 salary materially increases the annual repayment.
- Division 293. An extra 15% on concessional super contributions once income plus those contributions exceeds $250,000. The reportable amount counts towards the test, and that threshold has not moved since 2017.
- Medicare levy surcharge and the private health rebate. Both are income tested on a basis that includes the reportable amount.
- Family Tax Benefit and Child Care Subsidy. Both are reduced as adjusted taxable income rises, and both reconcile after year end. A reportable amount that nobody flagged is a common cause of an unexpected family assistance debt.
- Child support. Adjusted taxable income is the basis of the assessment.
- Super co-contribution and the spouse contribution offset. Both income tested, both affected.
None of this makes salary packaging a bad idea. It frequently remains worth doing. It does mean the calculation an employee ran before they packaged the car is incomplete if it stopped at the income tax saving.
What Gets Counted
Most fringe benefits are reportable once the threshold is crossed. The ones that actually get people over it:
- Cars available for private use. The single largest contributor. A car garaged at an employee's home is available for private use whether or not it is driven, and the taxable value under the statutory formula is 20% of the base value.
- Expense payments. Paying or reimbursing an employee's rent, mortgage, school fees, personal phone or health insurance.
- Housing. Providing accommodation free or at a discount.
- Loan benefits. A loan below the benchmark rate, which is 8.27% for the FBT year ending 31 March 2027. A $20,000 interest-free loan produces a taxable value of $1,654 for the year, which is most of the way to the threshold on its own.
- Debt waivers. Forgiving an amount an employee owed you.
- Property. Giving an employee a business asset, or selling it to them below market value.
- Memberships and recreation. Gym memberships, club fees, tickets, holidays.
What Does Not
Several benefits are excluded from reporting even where they are substantial. These are exclusions from the reporting rules specifically, not simply small amounts.
- Car parking fringe benefits. Excluded from reporting, whether or not FBT was payable on them.
- Meal entertainment and entertainment facility leasing are excluded from reporting for most employers, though employers that elect certain valuation methods, and some exempt employers, do report them.
- Pooled or shared cars. A car genuinely used by more than one employee during the year is excluded from each of their reportable amounts. Genuinely shared is the operative word.
- Exempt benefits are not fringe benefits at all, so they never reach the threshold. This covers work-related portable electronic devices used primarily for work, protective clothing, tools of trade, and minor benefits under $300 that are infrequent and irregular.
- Remote area housing benefits that meet the conditions.
The electric vehicle point is worth calling out because it surprises people. An eligible zero or low emissions car below the fuel-efficient luxury car tax threshold, $91,661 for 2026-27, is exempt from FBT, so there is no tax to pay. The value is still included in the reportable amount. The exemption removes the tax, not the reporting, and an employee with a packaged EV can have a large reportable figure and no FBT attached to it at all.
Exempt Employers Report It Differently
Public benevolent institutions, health promotion charities, public and not-for-profit hospitals and public ambulance services are exempt from FBT up to a capping threshold under section 57A.
Their employees still get a reportable amount, but it goes in a separate field on the income statement flagged as exempt from FBT under section 57A. That distinction matters because some income tests treat the exempt amount differently from an ordinary one, and reporting it in the wrong field produces the wrong outcome for the employee.
If you are one of these employers, this is worth confirming with your payroll software rather than assuming. If you are not, you report in the ordinary field and the distinction does not arise.
Tell Them Before They Find Out
Nothing in this article is hard to explain. It is only hard to explain in July, to someone who has already lodged, or already had their family payments reconciled.
A short note when the packaging arrangement starts, and a heads-up in April once you know the figure, costs nothing and removes most of the problem. Three things are worth putting in writing:
- The reported number will be roughly 1.89 times the value of the benefit, and that is expected, not an error.
- No income tax is payable on it, but it counts for HELP repayments, family payments, the Medicare levy surcharge and child support.
- Employee contributions reduce it, and where the arrangement is close to the threshold a contribution can remove the reporting entirely.
If an employee is near a means-test cliff, that third point is worth modelling properly before the FBT year ends rather than after.
Frequently Asked Questions
Does my employee pay tax on the reportable amount?
No. It is not included in taxable income and no tax is withheld on it. It is used for income tests, which is a different thing and frequently a more expensive one.
Why is the number so much bigger than the benefit?
Because it is grossed up by 1.8868. It represents the pre-tax salary an employee at the top marginal rate would have needed to earn to buy the benefit with their own after-tax money.
We are registered for FBT but nobody went over $2,000. What do we report?
Nothing on any income statement. You still deal with the FBT return itself, either by lodging or by giving the ATO a notice of non-lodgement.
Does the reportable amount affect payroll tax or super?
Super is calculated on ordinary time earnings, which does not include fringe benefits. Payroll tax is a separate state matter: in Victoria the grossed-up taxable value of fringe benefits is included in taxable wages, on a different basis again from the reporting rules, so do not reuse the reportable figure for it.
Can an employee reduce their reportable amount?
Yes, through employee contributions, which reduce the taxable value dollar for dollar. The contribution has to be genuinely made and the GST on it accounted for. A journal entry created after year end describing a payment that never happened is not a contribution.
The employee's car is an EV and we paid no FBT. Do we still report?
Yes. The exemption removes the FBT liability, not the reporting obligation. The value still counts towards the $2,000 threshold and towards the reported amount.
We got it wrong on last year's income statement. What now?
Amend the STP finalisation for that year. If the employee has already lodged, they will need to amend their return, and if family payments were affected the reassessment flows from there. Fixing it promptly is materially better than waiting for it to surface.
Reportable fringe benefits are a reporting rule rather than a tax, which is exactly why they get overlooked until they cause a problem for someone who did not know they existed. The work is in identifying who crosses $2,000 before 31 March, not in the arithmetic afterwards.
Trew North Accounting handles FBT returns, salary packaging reviews and STP finalisation for Melbourne employers, and looks at packaging arrangements against the income tests before they are set up. See our related guides on the FBT due date and whether salary sacrifice is worth it, our accounting and tax planning service, or get in touch.
This article is general information, not advice for your circumstances. Rates and thresholds change. Check current requirements with the ATO or with us before you finalise.