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Episode
30
FBT Power Plays: The Boss-Level Guide to Salary Packaging
We've spent two weeks talking about audits, penalties, and 47% tax bills. Now it's time for the payoff. Join Mia, Leo, and Harvey Green for the grand finale of our FBT series as we uncover the specific exemptions that let you give your staff laptops, electric vehicles, and gifts completely tax-free.
Frequently Asked Questions
Q: What is the Section 58X work-related items exemption?
A: Section 58X is a provision in the FBT legislation that provides a complete exemption for certain portable electronic devices provided to employees primarily for work use. This includes laptops, tablets, iPads, mobile phones, GPS units, and electronic diaries. If the device is used predominantly for employment purposes, the employer pays zero FBT, can claim the GST credit, and can claim a tax deduction for the cost.
Q: Is there a limit on how many devices a small business can provide under the Section 58X exemption?
A: For large corporate employers, the exemption is generally limited to one item per employee per FBT year for items with a substantially identical function. However, if you are a small business entity with an aggregated turnover under $50 million, this restriction does not apply. You can provide an employee with a laptop, an iPad, and a mobile phone in the same FBT year, and all three can qualify for the exemption, provided they are primarily for work use.
Q: How does the FBT exemption for electric vehicles work?
A: The Australian Government provides a full FBT exemption for eligible electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) that are below the luxury car tax threshold for fuel-efficient vehicles, which is approximately $91,000 for the 2025-26 financial year. The exemption applies to the vehicle itself as well as associated running costs paid by the employer, including registration, insurance, repairs, maintenance, and electricity charging costs. This makes providing an EV to an employee significantly more tax-effective than a traditional petrol or diesel vehicle.
Q: How does salary packaging an electric vehicle benefit the employee?
A: Under a salary packaging arrangement, the employee agrees to reduce their pre-tax salary by the amount of the lease payment and running costs. Because the reduction comes from pre-tax income, the impact on their take-home pay is significantly less than the cost of the vehicle. For example, a $1,500 monthly lease might only reduce the employee's take-home pay by $800 to $900 per month. The employee gets the use of a new electric vehicle for a fraction of the after-tax cost of leasing or purchasing it personally.
Q: Does the electric vehicle FBT exemption affect the employee's Reportable Fringe Benefits amount?
A: Yes. Even though the employer pays zero FBT on the electric vehicle, the grossed-up taxable value of the benefit is still recorded on the employee's income statement as a Reportable Fringe Benefit. This amount—typically in the range of $15,000 to $20,000 per year—is added to the employee's adjusted taxable income for the purposes of calculating HECS/HELP repayments, child support obligations, Medicare Levy Surcharge liability, and eligibility for certain government benefits. Employees with HECS debts should model this impact carefully before entering a salary packaging arrangement.
Q: What is the difference between entertainment and non-entertainment gifts for FBT purposes?
A: Entertainment generally involves the provision of food, drink, or recreation, such as taking staff to a restaurant, the movies, or a sporting event. Non-entertainment gifts include items like hampers, gift vouchers, flowers, bottles of wine, or other tangible goods. The distinction is critical because non-entertainment gifts under $300 per person are exempt from FBT and remain tax-deductible, whereas entertainment under $300 is exempt from FBT but not tax-deductible. A $200 hamper is therefore more tax-efficient than a $200 dinner.
Q: What are the salary packaging caps for public hospital and charity employees?
A: Employees of public hospitals and public ambulance services can salary package up to $9,010 of their living expenses (such as rent or mortgage payments) tax-free each FBT year. Employees of registered charities and public benevolent institutions (PBIs) can package up to $15,900 of living expenses tax-free. In addition to the general cap, these employees are also entitled to a separate meal entertainment cap of approximately $2,650 per year, which can be accessed via a dedicated dining or entertainment card.
Q: What relocation expenses are exempt from FBT when hiring a new employee?
A: If an employer hires a new employee who is required to relocate their usual place of residence to take up the position, the employer can pay for certain relocation costs without triggering FBT. Exempt expenses include the cost of removalists, flights and travel for the employee and their immediate family, connection or reconnection of utilities at the new residence, and a limited period of temporary accommodation while the employee secures permanent housing. This exemption is a powerful tool for attracting talent from interstate or overseas without incurring a 47% tax penalty.
Q: Why is a relocation package often better than offering a higher salary?
A: A higher salary is subject to income tax at the employee's marginal rate (up to 47%), meaning a significant portion of the increase goes to the ATO rather than the employee. Relocation expenses paid directly by the employer under the FBT exemption are provided tax-free. The employee receives the full value of the benefit without any reduction to their take-home pay. For employers competing for scarce talent, a tax-free relocation package can be more attractive to candidates than an equivalent gross salary increase.
Q: Can I provide multiple exempt benefits to the same employee in a single year?
A: Yes, provided each benefit meets its own specific exemption criteria. A small business could provide an employee with a laptop under Section 58X, an electric vehicle under the EV exemption, a $250 Christmas hamper under the minor benefits exemption, and a relocation package upon hiring, all within the same FBT year and all entirely free of FBT. The key is understanding and documenting the specific conditions attached to each exemption and ensuring the arrangements are structured correctly from the outset.
Read the transcript
Welcome to the podcast, our newsletter made easy. Please note, this podcast features AI-generated voices for your hosts, Mia Taylor and Leo Baker, bringing you expert insights from owner Ben De Rosa at Aevum Accounting. Each week, we're here to help you confidently navigate the ins and outs of Australian tax. Whether it's for your individual finances or the complexities of your business. We'll cut through the jargon to give you strategies for compliance, smart planning, and that ultimate peace of mind. So if you're looking to understand your obligations, maximize your financial position, or simply gain clarity on your money matters, you're in the right place.
Let's get started with our review of the week. This review is from Paula Livingston. She writes, "Recently used Ben at Aevum Accounting for my end of year tax return, he was knowledgeable and easy to deal with, made everything easy to understand and simple to complete. The offices were immaculate and the staff were wonderful, so much attention to detail, even including a drinks menu. Would highly recommend, will definitely be back. Thanks Ben and team." Thanks for the amazing review, Paula.
Now listeners, you have the patience of a saint. We have spent the last two weeks talking about audits, penalties, and 47% tax bills. It's been heavy. But today, today is the payoff. This is the grand finale. We are going to talk about the power plays, the specific exemptions that let you give your staff laptops, cars, and gifts completely tax-free. And to help us cross the finish line, he's back for the final lap, our FBT strategist, Harvey Green. Harvey, please tell me you brought good news.
I did. I feel like Santa Claus today. No more coal. Today's about the presents.
Harvey, let's start with the holy grail for small business owners. We know FBT usually hits anything that isn't cash, but there is a special section of the tax act, Section 58X. What is it?
Section 58X is the work-related items exemption. It basically says if you provide an employee with a portable electronic device primarily for work use, there is zero FBT.
Portable electronic device. That sounds fancy. What does it cover?
It covers the toys we all love: laptops, tablets, iPads, mobile phones, even GPS units and electronic diaries.
And here is the power play for our listeners. Most of you run small businesses, turnover under $50 million. Harvey, there is a special rule for them, right?
Huge rule. Normally, a big corporate company can only give one laptop per year to an employee. But if you are a small business entity, that restriction is gone. You can give an employee a laptop and an iPad and a phone in the same year. As long as they are for work, they are all tax-free.
Let's do the math on that, because this is where the win is.
Okay. Let's say an employee wants a $3,000 MacBook Pro. Option A: salary. They buy it themselves. To get $3,000 cash in their hand after tax, you'd have to pay them roughly $4,500 in salary. Option B: company purchase. You buy it for the business. You claim the GST back, $270. You claim the tax deduction. It costs the business roughly $1,900 net.
So the business pays $1,900 instead of paying $4,500 in salary?
Exactly. And the employee gets the brand-new MacBook. Everyone wins. If you aren't doing this for your key staff, you are crazy.
Okay, I'm sold on the tech. Now let's talk about the biggest tax break in Australia right now: electric vehicles.
This is the main course. The EV FBT exemption. If your company provides an electric car or a plug-in hybrid that is below the luxury car tax threshold—about $91,000—the FBT is exempt.
Zero tax on a car? That sounds too good to be true.
It is zero. And it covers everything: the lease payments, the registration, the insurance, the repairs, and even the electricity to charge it.
So how does the employee benefit?
They use salary packaging. Let's say the lease on a Tesla Model Y is $1,500 a month. The employee agrees to reduce their pre-tax salary by $1,500. Because it comes out before tax, it only reduces their take-home pay by about $800 or $900. So they are driving a $65,000 car for $200 a week.
That is incredible. But Harvey, we have to mention the reportable catch again. We learned this in episode 29.
Yes. Even though the employer pays zero dollars tax, the value of the car—approximately $15,000 to $20,000—still goes on the employee's payment summary. So if they have a HECS debt, their repayments will go up. They must model this with Ben first. But for most people without HECS, it's a massive win.
Let's move to the Christmas party. In episode 28, we told people that the party is a trap, but Harvey, you said there is a way to make giving gifts tax-efficient.
Yes. You have to choose entertainment versus non-entertainment. Taking staff to the movies or dinner, that's entertainment. It's messy. Giving staff a gift voucher, a hamper, a bottle of whiskey, or flowers, that is non-entertainment.
Why is non-entertainment better?
Because if the gift is under $300 and infrequent, it is exempt from FBT and tax-deductible.
Wait. So if I take them to dinner, $200, it's exempt but not deductible. But if I give them a Coles voucher, $200, it's exempt and deductible?
Bingo. The hamper is the tax winner. The dinner is the tax loser. So if you want to reward staff efficiently, buy the hamper.
I love that. Buy the hamper. Put that on a t-shirt. Now Harvey, let's talk about the heroes. We have a lot of listeners who work in non-profits, charities, and hospitals.
This is the salary packaging cap. If you work for a public hospital, you can package up to $9,010 of your living expenses—rent, mortgage—tax-free. If you work for a charity or public benevolent institution, it's $15,900.
That is basically the government saying, "Here is $16,000 of your salary tax-free."
Correct. And on top of that, they get a separate cap for meal entertainment of roughly $2,650. That's the dining card. You go out to dinner, tap the card, and it's paid with pre-tax dollars.
If you work in those sectors and you aren't using these caps, you are literally donating your own money to the ATO.
100%. It takes 15 minutes to set up. Do it today.
Harvey, we have one final power play that Ben mentioned in the notes: relocation expenses. We have a skill shortage in WA. Everyone is trying to hire from over east.
This is a hidden gem. If you hire someone and they have to move their home to take the job, for example Melbourne to Perth, the costs you pay are FBT exempt.
What can we pay for?
Removalists, flights for the whole family, connection of utilities, even some temporary accommodation while they look for a house. You can pay for all of that tax-free. It's a brilliant way to attract talent. Instead of offering a higher salary, which is taxed, offer a relocation package, which is tax-free.
That is smart. That is how you win the talent war.
Exactly. FBT isn't just about avoiding penalties. It's about structuring your offers so your business looks more attractive than the guy down the road.
Harvey, you have delivered the goods. We started this series scared of the paper monster, and now I feel like we're ready to tame it.
We've covered Episode 28: the hard truths, no school fees. Episode 29: the deep dive, logbooks save thousands. Episode 30: the power plays, tech, EVs, and hampers. It's been a journey. But if your listeners take just one thing away, don't guess. The rules are specific, but the rewards are there if you get the structure right.
Absolutely. And that is where Aevum Accounting comes in. Ben De Rosa and the team live and breathe this stuff.
If you are thinking about buying a ute, leasing an EV, or planning your Christmas party, talk to Ben before you spend the money. Visit us at aevumaccounting.com.au. Harvey Green, thank you for being our guide. You are officially invited to our Christmas party, which will definitely be under $300 per head.
I'll bring my calculator just in case. Thanks.
That's a wrap on our FBT series. Thank you to everyone who reviewed, subscribed, and sent in questions. We'll be back next week with a brand-new topic. Until then, stay savvy, stay proactive. And go buy that tax-free laptop. Goodbye for now. See ya.
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