Fringe benefits tax and employee retention are closely connected when employers use benefits to provide value beyond salary. When exemptions and concessions are used effectively, fringe benefits can help employees feel supported and appreciated, while allowing employers to manage costs and remain commercially competitive.

Fringe benefits tax, or FBT, applies when employers provide certain non-salary benefits to employees, directors or their associates. These benefits may include vehicles, work-related devices, training, entertainment, relocation support, reimbursements and other employee benefits.

Some sectors, such as not-for-profit and health organisations, may have access to higher FBT exemptions and rebates. However, this article focuses on how standard business employers can structure FBT-effective benefits, such as work-related devices, professional development, eligible electric vehicle arrangements, minor benefits and relocation support, to support employee retention.

Why fringe benefits tax matters for employee retention

Employee retention is an ongoing priority for many businesses. Salary remains important, but employees often place value on the broader remuneration package, including flexibility, development opportunities, practical support and benefits that reduce personal costs.

A structured approach to fringe benefits tax and employee retention can help employers:

  • Provide value beyond salary
  • Support flexible and hybrid work arrangements
  • Invest in employee development
  • Recognise and reward employees in a consistent way
  • Assist with relocation or hard-to-fill roles
  • Improve the perceived value of remuneration packages

The objective is not simply to provide more benefits. The objective is to offer benefits that employees value, while ensuring the FBT treatment is understood and appropriately managed.

Which FBT-effective benefits can help retain staff?

Many benefits valued by employees can be provided with little or no FBT cost when structured correctly. The following areas are commonly used by business employers as part of broader employee retention strategies.

Work-related devices

Work-related devices can be a practical and valued employee benefit.

Phones, laptops, tablets and similar portable electronic devices may be exempt from FBT where they are primarily used for work purposes. These benefits support productivity, flexible work arrangements and access to the tools employees need to perform their role effectively.

Common examples include:

  • Mobile phones
  • Laptops
  • Tablets
  • Portable printers
  • Other work-related technology

For employees, these benefits are practical and visible. For employers, they support productivity and help ensure employees have appropriate tools for their work.

Useful Links:
ATO Work-Related Exemption Info

Training and professional development

Training and professional development can assist with employee retention by showing a clear investment in employees’ skills and future within the business.

Employment-related training is typically exempt from FBT where it is sufficiently connected to the employee’s current role. This can make training an effective benefit for both employees and employers.

Examples may include:

  • Technical training
  • Professional development courses
  • Industry certifications
  • Role-specific education
  • Leadership development
  • Skills updates relevant to current duties

When employers invest in skill development, employees may be more likely to view the business as supporting their long-term career progression. This can improve loyalty and reduce the likelihood of employees seeking development opportunities elsewhere.

Minor benefits

Minor benefits can be useful for employee recognition, goodwill and culture-building activities.

The minor benefits exemption may apply where a benefit is under $300 and is provided infrequently and irregularly. This can include occasional gifts, small recognition benefits, or one-off team activities.

Examples may include:

  • Occasional thank-you gifts
  • Small milestone rewards
  • Infrequent team meals or events
  • One-off recognition benefits
  • Seasonal gestures where appropriate

However, the exemption does not automatically apply simply because a benefit is under $300. Frequency, regularity and the circumstances of the benefit must also be considered.

If minor benefits become regular, expected or part of a pattern, they may not qualify for the exemption.

Useful Links:
ATO Minor Benefits Exemption Info

Eligible electric vehicle arrangements

Eligible electric vehicle arrangements can be attractive to employees and may form part of a modern employee benefits strategy.

Where the relevant conditions are met, eligible electric cars and associated car expenses may be exempt from FBT. This has increased interest in electric vehicle salary packaging and novated leasing arrangements, particularly for employees who value sustainability, lower running costs or access to a newer vehicle.

Electric vehicle arrangements may be relevant for:

  • Senior employees
  • Employees who travel regularly for work
  • Sales teams
  • Employees with longer commutes
  • Employees interested in sustainability
  • Employees considering salary packaging options

Although eligible electric vehicles may be exempt from FBT, employers still need to consider eligibility, record-keeping and any reportable fringe benefits obligations.

Useful Links:
ATO EV Exemption Info

Relocation and targeted travel assistance

Relocation support and targeted travel assistance can be valuable where businesses need to attract or retain employees in competitive, regional or hard-to-fill roles.

Where benefits meet the relevant criteria, businesses may be able to assist employees with relocation, temporary accommodation or certain travel costs. This support can reduce the financial burden for employees and may be decisive when an employee is considering whether to accept or remain in a role.

This may be relevant where:

  • A role is difficult to fill locally
  • A business is expanding into a new region
  • An employee is relocating for business purposes
  • Temporary accommodation is required during a transition
  • Specialist employees are required in specific locations

Travel, accommodation and living-away-from-home arrangements can be complex from an FBT perspective. Employers should review the treatment carefully before offering these benefits.

Useful Links:
Davidsons article on employee relocation costs

Why these benefits can improve retention

Fringe benefits can support employee retention when they align with what employees value and are implemented consistently.

Higher perceived value

Some fringe benefits can deliver more perceived value than a comparable salary increase.

Examples may include:

  • Electric vehicle salary packaging
  • Additional superannuation contributions
  • Professional development
  • Work-related devices
  • Relocation support

These benefits can reduce personal costs, improve work arrangements or provide access to opportunities that employees may otherwise need to fund themselves.

Support for wellbeing and personal circumstances

Employees are more likely to remain with a business when they feel supported in practical ways.

Benefits that reduce day-to-day friction, support professional goals, or assist with personal circumstances can help build loyalty. This may include access to appropriate technology, development opportunities, relocation support, or benefits that align with employees’ lifestyle priorities.

Flexibility and personalisation

Different employees value different benefits.

A graduate may place high value on training and development. A senior employee may value an electric vehicle arrangement. A relocating employee may value temporary accommodation support. A hybrid employee may value reliable technology.

FBT-effective benefits can allow employers to tailor part of the remuneration package to different workforce needs, improving satisfaction across employee groups.

Demonstration of genuine investment

Employees respond positively when they see tangible investment in their development, tools and work environment.

Providing structured benefits can show that the employer is willing to invest in employees beyond base salary. This can strengthen engagement and support retention over time.

What challenges should business employers consider?

Using fringe benefits tax rules to support retention can create value, but it also requires careful management.

Employers should consider:

  • Accurate classification of benefits to avoid unexpected FBT liabilities
  • Strong record-keeping, especially for vehicles, travel and accommodation
  • Whether employee declarations are required
  • Whether reportable fringe benefits need to be included on income statements
  • How benefits may affect employees’ government entitlements or obligations
  • Whether internal policies clearly explain eligibility and approval processes
  • Monitoring ATO updates, particularly for electric vehicles, travel, car parking and accommodation

These challenges can generally be managed with clear internal policies, appropriate documentation and annual reviews.

Common mistakes employers make

FBT issues often arise when benefits are provided without confirming the tax treatment or maintaining appropriate records.

Common mistakes include:

Treating benefits as exempt without confirming eligibility

A benefit may appear work-related, but that does not automatically mean it is exempt from FBT. Employers should confirm that the relevant exemption or concession applies before relying on it.

Providing minor benefits too regularly

The minor benefits exemption is not based only on the value of the benefit. Frequency and regularity are also important. Benefits provided regularly may not qualify, even if each individual benefit is under $300.

Misclassifying travel or accommodation

Travel, relocation and living-away-from-home arrangements require careful review. The FBT treatment can change depending on the purpose of the travel, the employee’s circumstances and the length of the arrangement.

Offering wellbeing benefits without reviewing FBT

Wellbeing initiatives can support retention and culture, but some benefits may still attract FBT. Employers should check the treatment before assuming these benefits are exempt.

Missing reportable fringe benefits

Some benefits may need to be reported on employee income statements. Employers should understand whether reportable fringe benefits obligations apply and communicate any employee implications clearly.

Failing to maintain accurate vehicle records

Vehicle-related benefits require appropriate documentation. This may include logbooks, odometer readings, business-use records and evidence of eligibility for any exemption.

How should businesses structure FBT-effective retention programs?

A structured approach can help employers provide meaningful benefits while managing FBT risk.

1. Identify which benefits employees value most

Employers should start by understanding which benefits are most relevant to their workforce.

This may involve employee surveys, feedback from managers, exit interview themes or review of recruitment and retention challenges.

Common areas of interest may include:

  • Training and development
  • Work-related technology
  • Electric vehicle arrangements
  • Flexible work support
  • Relocation assistance
  • Recognition benefits
  • Salary packaging options

2. Prioritise benefits with clear FBT treatment

Employers may wish to prioritise benefits that have clearer FBT treatment, such as:

  • Work-related devices
  • Employment-related training
  • Genuine minor benefits
  • Eligible electric vehicle arrangements
  • Certain relocation support

This helps reduce uncertainty and allows benefits to be implemented with greater confidence.

3. Create a clear salary packaging or benefits policy

A clear policy helps ensure benefits are provided consistently.

The policy should explain:

  • Which benefits are available
  • Who is eligible
  • How benefits are approved
  • What records are required
  • Whether benefits may be reportable
  • How salary packaging arrangements are managed
  • When the program will be reviewed

Clear policies can also help employers avoid making informal arrangements that create unintended FBT issues.

4. Check classifications for higher-risk benefits

Some benefits require closer review before they are offered.

These include:

  • Cars and electric vehicles
  • Travel
  • Accommodation
  • Car parking
  • Entertainment
  • Meals
  • Relocation support
  • Living-away-from-home arrangements

These areas often depend on the specific facts and require accurate records.

5. Communicate the value and implications clearly

Benefits are more effective for retention when employees understand their value.

Employers should communicate:

  • What the benefit includes
  • How the benefit works
  • Whether there are employee implications
  • Whether reportable fringe benefits may arise
  • What records or declarations are required
  • Who to contact with questions

Clear communication helps employees understand the full value of their remuneration package.

6. Review the program each year before 31 March

The FBT year ends on 31 March. Employers should review benefits before year-end to confirm exemptions, identify documentation gaps, check reporting requirements and manage any potential FBT liabilities.

Annual reviews also allow businesses to assess whether benefits remain aligned with employee needs and broader workforce priorities.

Summary insight

Although some sectors have access to additional FBT concessions, business employers can still achieve strong retention outcomes by prioritising exemptions, structuring benefits carefully and aligning offerings with employee needs.

Work-related devices, employment-related training, minor benefits, eligible electric vehicle arrangements and relocation support can all contribute to employee satisfaction when managed correctly.

The key is to ensure benefits are properly classified, clearly documented and reviewed regularly.

Need help reviewing your fringe benefits tax position?

If your business provides employee benefits, salary packaging, vehicles, relocation support, entertainment, or work-related perks, it is important to understand the FBT treatment before the end of the FBT year.

Davidsons can help review your current arrangements, identify FBT-effective opportunities and support the development of employee benefits that align with both retention goals and tax obligations.

FAQ: Fringe benefits tax and employee retention

What is fringe benefits tax?

Fringe benefits tax, or FBT, is a tax employers may pay when they provide certain non-salary benefits to employees, directors or their associates because of their employment. These benefits may include cars, entertainment, reimbursements, salary packaging arrangements, work-related items and other employee benefits.

How can fringe benefits tax support employee retention?

Fringe benefits tax rules can support employee retention by helping employers structure benefits that employees value beyond salary. Benefits such as work-related devices, professional development, eligible electric vehicle arrangements, minor benefits and relocation support can improve the overall value of a remuneration package.

What are FBT-effective benefits?

FBT-effective benefits are employee benefits that are structured to manage or reduce FBT exposure while still providing value to employees. This may include benefits that are exempt, concessionally treated, or commercially worthwhile after FBT has been considered.

What employee benefits may be exempt from FBT?

Some employee benefits may be exempt from FBT if they meet specific conditions. Common examples include certain work-related portable electronic devices, employment-related training, genuine minor benefits and eligible electric vehicle arrangements.

Are work-related devices exempt from FBT?

Work-related devices such as laptops, mobile phones and tablets may be exempt from FBT where they are primarily used for work purposes. Employers should maintain records that support the work-related use of the device.

Are minor benefits under $300 always FBT-free?

No. Minor benefits under $300 may be exempt from FBT where they are infrequent, irregular and it would be unreasonable to treat them as fringe benefits. The exemption does not automatically apply simply because the value is below $300.

Can electric vehicles be exempt from FBT?

Eligible electric vehicles may be exempt from FBT if the relevant conditions are met. Employers should also consider eligibility, record-keeping and reportable fringe benefits obligations before offering electric vehicle arrangements.

Can training be provided without FBT?

Employment-related training may be exempt from FBT or otherwise treated favourably where it is connected to the employee’s current role. Employers should confirm the treatment before providing or reimbursing training costs.

Can relocation support help retain employees?

Yes. Relocation support can help retain or attract employees in hard-to-fill, regional or specialist roles. However, relocation, travel and accommodation benefits can be complex from an FBT perspective and should be reviewed carefully.

What records do employers need for FBT?

Record-keeping requirements depend on the type of benefit provided. Employers may need to keep invoices, employee declarations, salary packaging agreements, logbooks, odometer readings, evidence of business use and internal approval records.

Do reportable fringe benefits affect employees?

Reportable fringe benefits are not taxed directly to the employee, but they may affect income tests for certain government benefits, obligations or entitlements. Employers should communicate this clearly when providing relevant benefits.

When should employers review fringe benefits tax?

Employers should review their FBT position before 31 March each year, as the FBT year runs from 1 April to 31 March. This allows time to identify exemptions, check records, manage reporting obligations and address any potential issues.

What are common FBT mistakes employers make?

Common mistakes include assuming benefits are exempt without checking, providing minor benefits too frequently, misclassifying travel or accommodation, missing reportable fringe benefits, offering wellbeing benefits without reviewing FBT implications and failing to maintain vehicle records.

How can Davidsons help with fringe benefits tax and employee retention?

Davidsons can help businesses review existing employee benefits, identify FBT-effective opportunities, manage compliance obligations and structure benefits that support employee retention, workforce planning and broader commercial goals.

Author: Kylie McEwan – Director | Partner

Disclaimer: The information that is provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals. Davidsons is not licensed to provide any financial product advice nor make any recommendations in respect of any financial product. If you require such advice, you will need to consult a financial adviser who is licensed to provide financial product advice before you make a decision on a financial product.