FBT 2026 – What you need to know

The 2026 Fringe Benefits Tax (FBT) year ends on 31 March, with the ATO focussing much of their compliance and audit activity on FBT, it’s important to ensure that you are across any FBT issues before the ATO comes to you!

There are several types of fringe benefits, including:

• Motor vehicle benefits

• Expense payment benefits (paying your employees’ private expenses e.g. fuel, health insurance premiums)

• Loans to employees

• Entertainment

• Car parking (most small to medium businesses will be exempt)

• Residual benefits – e.g. providing a vehicle to an employee that is not defined as a “car” for FBT purposes (motorbikes/commercial vehicles etc)

The most common benefits provided are motor vehicle benefits and entertainment, so let’s talk about those.

Motor Vehicle Benefits (including electric vehicles “EVs”)

• If you drive a vehicle owned by your business yourself, or provide vehicles owned by your business to your employees, you have FBT exposure 

• Dual cab utes are not automatically exempt from FBT – many employers assume that dual cab utes are exempt from FBT, but this is not always the case

• Not all Electric Vehicles are exempt from FBT – for those that are, a Reportable Fringe Benefit Amount (RFBA) still needs to be calculated each year and reported on the STP Income Statement of the employee who drives the vehicle

• Log books should be kept for all vehicles owned by your business that you either drive yourself, or that are made available to an employee (not just a car in a pool that’s available to any employee and only available for work use during business hours)

• Odometer readings, as at 31 March each year, should be recorded for all vehicles owned by your business

• Many vehicle benefits for business owners can be managed with “employee contributions” without the need to lodge an FBT return 

  
  

Motor vehicles are under the ATO spotlight

The ATO is actively targeting employers who fail to report or incorrectly report fringe benefits. ATO compliance teams are specifically looking for businesses that:

• Fail to lodge FBT returns despite providing vehicles for private use

• Misunderstand exemptions, particularly the common misconception that dual-cab utes are automatically exempt from FBT

• Neglect record-keeping, such as failing to maintain valid logbooks or odometer readings to support their claims

• Incorrectly apportion usage, often treating private travel—including garaging a vehicle at an employee's home—as business use

To ensure compliance, the ATO emphasises that a vehicle is considered "available for private use" if it is garaged at or near an employee's home, regardless of whether they have permission to use it

The ATO has access to vehicle registration records – thousands of taxpayers have already received letters from the ATO detailing vehicles registered to their business and asking for FBT returns to be lodged.

An ATO audit can be both stressful and expensive, and can often result in significant penalties – it’s important to review your vehicles and make sure that all benefits are correctly treated.

Entertainment Benefits

• Lunch or dinner at the pub or at a restaurant?

• Christmas party?

• Melbourne Cup bash?

• Tickets to the theatre or the footy?

  
  

You’ve just provided your employees with an “entertainment benefit”.

Depending on how much you spend, and how often these events occur, many entertainment benefits can be exempt from FBT under the “minor and infrequent” exemption.

If the entertainment benefits are exempt:

• You don’t pay FBT on them, and don’t need to lodge an FBT return

• You can’t claim GST on the expenses

• You can’t claim a tax deduction for the expenses

  
  

If the entertainment benefits are not exempt you must lodge a FBT return and pay Fringe Benefits Tax.

Mismatched claims for entertainment – claimed as a deduction but no FBT

One of the easiest ways for the ATO to pick up on problem areas is where there are mismatches.

When it comes to entertainment, employers are often keen to claim a tax deduction, but this can be a problem if it is not recognised as a fringe benefit provided to employees.

Note that entertainment provided to clients (e.g. taking a client to lunch at a restaurant) will not be subject to FBT, but these expenses are not tax deductible, and you can’t claim GST.

Record keeping tip – keep separate expense accounts in your accounting software for “Entertainment – Clients” & “Entertainment – Employees”. Allocate all relevant entertainment expenses to these accounts and do not claim GST. These accounts can then be easily reviewed at year end to determine your FBT liability (if any).

Key Take-Aways

The ATO is concerned that some employers are not lodging FBT returns when required to.

If your business employs staff (even “closely held” staff such as family members), and is not registered for FBT, it’s essential to ensure that the position is reviewed to check whether the business could potentially have a FBT liability.

If the business provides cars, car spaces, reimburses private (not business) expenses, provides entertainment (food and drink), employee discounts etc., then you are likely to be providing at least some fringe benefits.

There is a list of benefits that are considered exempt from FBT, such as portable electronic devices like laptops, protective clothing, tools of trade etc. If your business only provides these exempt items, or items that are infrequent and valued under $300, then you are unlikely to have to worry about FBT.

If you have any questions about your FBT exposure, please contact your Client Manager today.