If you're an employer who offers salary sacrificed work-related benefits, there's a date worth putting in the diary: 1 April 2027.
From that date, the fringe benefits tax (FBT) treatment of some salary sacrificed work-related benefits will change. This isn't a proposal. The changes were enacted under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026, and they apply to FBT years beginning on or after 1 April 2027. The ATO has also published guidance on how they will work.
It's connected to the new $1,000 standard deduction for work-related expenses that started on 1 July 2026, and it could add to the FBT bill for employers who package these benefits today.
There's still time to prepare. The FBT year runs to 31 March, so the first year affected is the one that starts on 1 April 2027.
Two things are changing
The changes come in two parts. Both only apply where the benefit is provided under a salary sacrifice arrangement.
1. The 'otherwise deductible' rule is being restricted.
At the moment, if an employer pays for or reimburses a work-related expense that the employee could have claimed as a deduction, the 'otherwise deductible' rule can reduce the taxable value of that benefit. In many cases, that brings the FBT cost down significantly.
- work-related
- covered by the new $1,000 standard deduction, and
- provided under a salary sacrifice arrangement
That includes things like paying for or reimbursing home office expenses, home phone or internet costs, and self-education expenses.
The restriction applies when the expense is salary sacrificed. Where the same expense isn't salary sacrificed, the rule can generally continue to apply.
2. Some work-related items will lose their FBT exemption.
- portable electronic devices
- computer software
- protective clothing
- briefcases and tools of trade
What isn't changing
It helps to be clear about what stays the same. The 'otherwise deductible' rule can still apply where an expense isn't covered by the standard deduction, or where it is covered but isn't provided under a salary sacrifice arrangement.
Eligible work-related items can also still qualify for the FBT exemption when they're not provided under salary sacrifice. In other words, the change is about how the benefit is provided, not about the items themselves.
A small change in the other direction
There's one change that works in employers' favour. From 1 April 2027, the general 'one-item' restriction on the work-related item exemption is being repealed.
That means employers may be able to provide an employee with more than one eligible work-related item in an FBT year, even where the items have the same or substantially identical function. The exemption can continue to apply as long as the items are mainly used for work and aren't provided under a salary sacrifice arrangement.
What employers could do now
None of this bites until April 2027, which is a good reason to look at it early rather than in a rush. A sensible starting point is to:
- Review your salary sacrifice arrangements. List which work-related benefits are currently packaged, and which fall under the standard deduction or the affected item categories.
- Check your policies and employment agreements. Existing documents may refer to concessions that will no longer apply to salary sacrificed benefits.
- Estimate the cost. Where FBT could now apply, it's worth working out the likely impact so it can be built into your cash flow forecasts and budgets for the 2027-28 FBT year.
- Talk to your team early. If a benefit is going to change or be repackaged, employees will appreciate hearing about it well before the date.
Some employers will decide to keep offering a benefit and absorb the FBT. Others may prefer to provide it outside salary sacrifice, where the existing concessions can continue. That's a business decision, and it often sits within a broader business advisory conversation about remuneration and costs.
It's also worth being clear on how allowances and reimbursements are set up in the first place, since separating them properly matters for both FBT and employee claims. We covered one example of this in our article on the travel and overtime meal allowance rates.
Plenty of time, if you use it
For most employers, the real risk is being caught out by a benefit that was exempt last year and isn't this year. Reviewing your arrangements now gives you room to decide how to handle each one calmly, rather than finding out when the FBT return is due.
If you provide salary sacrificed work-related benefits and would like a second set of eyes on your current arrangements, book a conversation with the team at Trekk Advisory to review them before 1 April 2027.
Disclaimer: This article is general information only and does not take into account your personal circumstances. Please speak with a qualified adviser, or contact Trekk Advisory, to discuss how this applies to your situation.
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