FBT for NFPs: What Charities and Schools Need to Know

Fringe benefits tax (FBT) is one of the most misunderstood taxes in the not-for-profit sector. Many boards assume that because their organisation is a charity, FBT does not apply. In practice, your FBT position depends on what kind of organisation you are, how your salary packaging is set up, and how much each employee receives.

This guide explains the three FBT positions an NFP can be in, how the caps work, and the mistakes we see most often.

Quick Summary

FBT applies to most employers, including charities, unless a specific concession applies.
Public benevolent institutions (PBIs) and health promotion charities can be **FBT exempt** up to a cap of $30,000 grossed-up per employee.
Public and not-for-profit hospitals and public ambulance services have a lower exemption cap of $17,000 grossed-up per employee.
Other eligible charities and certain institutions are **rebatable employers**: they receive a 47% rebate on FBT for the first $30,000 grossed-up per employee.
Many NFPs, including some schools, get no FBT concession at all and pay FBT like any other employer.
The FBT year runs from 1 April to 31 March.

The three FBT positions for an NFP

1. FBT exempt employers

PBIs and health promotion charities that are endorsed by the ATO can provide fringe benefits free of FBT, up to a capping threshold. For the year ended 31 March 2026, the ATO lists the threshold as $30,000 grossed-up per employee. For public and not-for-profit hospitals and public ambulance services, it is $17,000.

The cap is measured on the total grossed-up value of benefits each employee receives in the FBT year. It applies in full even if the employee only worked part of the year. Benefits that are exempt anyway, such as minor benefits, are not counted.

If any employee goes over the cap, FBT is payable on the excess, and you must lodge an FBT return.

2. Rebatable employers

Rebatable employers still pay FBT, but receive a rebate. For the year ended 31 March 2026 the rebate is 47% of the gross FBT payable, applied to the first $30,000 of grossed-up benefits per employee.

According to the ATO, rebatable employers include charities that are institutions (but not PBIs) registered with the ACNC and endorsed by the ATO, religious institutions, certain scientific or public educational institutions, and some other not-for-profits such as those established to encourage music, art or literature.

Charities that are not institutions, and charities established under government legislation, do not qualify.

3. No concession

If your organisation does not fit either group above, you pay FBT at the full rate like a commercial employer. This often surprises boards. Being a registered charity, or being income tax exempt, does not by itself give you an FBT concession.

What about schools?

Independent schools need to check their position carefully. A school's FBT status depends on its legal structure, its ACNC subtype, and its ATO endorsements. Some schools may qualify as rebatable employers. Others will have no concession. A school is rarely a PBI.

Do not assume your school's status from another school's arrangements. Check your own ATO endorsements and get advice before offering salary packaging.

How the cap works in practice

The figures above are grossed-up values. Grossing up converts the value of a benefit into the pre-tax salary an employee would have needed to buy it. For the year ended 31 March 2026, the ATO lists:

FBT rate: 47%
Type 1 gross-up rate (where GST credits can be claimed): 2.0802
Type 2 gross-up rate (where they cannot): 1.8868

Rates can change, so check the ATO's FBT rates and thresholds page for the current year before you rely on them.

Some benefits are left out of the cap. The ATO lists car parking benefits, and meal entertainment and entertainment facility leasing that is not salary packaged. Salary-packaged meal entertainment and venue hire has its own separate cap, so it does not use up the main $30,000.

Common mistakes we see

1. Assuming charity status means FBT free. Only specific types of organisation get a concession. 2. Letting employees exceed the cap. One employee over the cap means you must lodge an FBT return and report benefits for all employees. 3. Poor salary packaging records. Packaging providers make mistakes. Your finance team should reconcile packaging reports to payroll every month. 4. Not reporting benefits on income statements. Reportable fringe benefits must appear on employees' income statements, even when you pay no FBT. 5. Forgetting non-cash benefits. Cars, phones used privately, staff accommodation and school fee discounts can all be fringe benefits.

What your board should ask

What is our FBT status, and when was it last confirmed against our ATO endorsements?
Do we have a salary packaging policy, and who monitors employees against the cap?
Did any employee exceed the cap last FBT year?
Who reconciles salary packaging to payroll, and how often?
Are reportable fringe benefits correctly shown on income statements?

Governance and record keeping

FBT is a governance issue, not just a payroll task. Under ACNC Governance Standard 5, Responsible People must oversee the charity's finances responsibly. A surprise FBT bill, or benefits given above the cap without anyone noticing, is a sign that oversight has broken down.

The ACNC requires registered charities to keep financial records for seven years. For FBT, that means keeping:

your ATO endorsement records showing your FBT status
your salary packaging policy and each employee's packaging agreement
monthly packaging reports, reconciled to payroll
a calculation of each employee's grossed-up total against the cap
employee declarations, car logbooks and other FBT records
board or finance committee minutes approving the policy and reviewing the annual FBT position

Good records let you prove your position to the ATO and your auditor, and make the annual FBT review quick.

Frequently Asked Questions

Q: Is every registered charity exempt from FBT? A: No. Only PBIs, health promotion charities, and certain hospitals and ambulance services are FBT exempt, and only up to their cap. Other charities may be rebatable or have no concession.

Q: What happens if an employee goes over the $30,000 cap? A: FBT is payable on the amount above the cap, and you must lodge an FBT return that reports fringe benefits for all employees, not only the one who exceeded it.

Q: When is the FBT year? A: The FBT year runs from 1 April to 31 March.

The Bottom Line

FBT concessions are valuable for NFPs, but they depend on your exact status and on careful monitoring of each employee's benefits. A short annual review of your FBT position and salary packaging can prevent unexpected tax bills.

Official guidance

[ATO: FBT exempt organisations](https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/fbt-concessions-for-not-for-profit-organisations/fbt-exempt-organisations)
[ATO: FBT rebatable employers](https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/fbt-concessions-for-not-for-profit-organisations/fbt-rebatable-employers)
[ATO: FBT rates and thresholds for 2026](https://www.ato.gov.au/forms-and-instructions/fringe-benefits-tax-return-2026-instructions/fbt-rates-and-thresholds-for-2026)
[ACNC: Record keeping](https://www.acnc.gov.au/tools/topic-guides/record-keeping)

This article is general information only and does not take your organisation's circumstances into account. Get advice before acting on it.

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