As the Fringe Benefits Tax (FBT) year draws to a close on 31 March 2026, now is the ideal time for businesses to review any benefits provided to employees during the year and ensure the correct records are in place.
FBT can apply to a range of non-salary benefits provided to employees or directors, and the rules can sometimes catch businesses off guard. Below are several areas worth reviewing before the end of the FBT year.
Electric Vehicles and FBT
Recent years have seen significant interest in electric vehicles due to available tax concessions.
Employers may be eligible for an FBT exemption where they provide an electric vehicle to an employee for private use if certain conditions are met. Generally, this applies where:
- The vehicle is owned or leased by the employer
- It is a zero or low-emission vehicle
- The car was first provided to an employee on or after 1 July 2022
- The vehicle’s value falls below the luxury car tax threshold for fuel-efficient vehicles
However, it is important to note that plug-in hybrid vehicles will no longer qualify for the exemption from 1 April 2025, unless they were already part of an existing arrangement that continues under a binding agreement.
Work Vehicles and Private Use
The private use of company vehicles continues to be one of the most common FBT risk areas.
A common misunderstanding is that certain vehicles (such as dual-cab utes) are automatically exempt from FBT. In reality, eligibility depends on the type of vehicle and how it is used.
Another key issue arises when a vehicle is garaged at an employee’s home. Even if the employee rarely uses the vehicle privately, the tax rules may still consider the vehicle available for personal use.
Maintaining accurate records such as logbooks and odometer readings is essential. Without adequate documentation, the tax office may apply a different calculation method that can increase the taxable value of the benefit.
Record Keeping – Small Steps Can Save Time
Keeping records for FBT can be challenging, particularly when information needs to be gathered from employees.
A simple tip for businesses with company vehicles is to ensure odometer readings are recorded on 31 March and 1 April each year. A quick photo taken on a phone and sent to a central contact can prevent missing records later.
Recent legislative changes also allow some businesses to rely on existing business records rather than separate FBT-specific declarations in certain situations, helping to reduce administrative workload.
Entertainment and Other Benefits
Another area that frequently creates issues is entertainment expenses.
Businesses sometimes claim deductions for meals or events involving employees without considering whether those benefits should also be reported for FBT purposes. In some situations, entertainment provided to employees may trigger FBT, while in others it may not be deductible.
Other common benefits that may attract FBT include:
- Private use of company vehicles
- Company payment of personal expenses
- Employee discounts
- Reimbursements of non-work-related costs
- Meal or event entertainment
Ensuring expenses are correctly categorised during the year can help avoid surprises at FBT time.
Contractors vs Employees
FBT generally applies to benefits provided to employees and certain office holders, such as directors.
While genuine independent contractors are typically outside the FBT system, correctly classifying workers can sometimes be complex. A written agreement alone does not always determine the nature of the relationship, so businesses should periodically review contractor arrangements to ensure they remain correctly classified.
If You Had FBT Last Year
If your business lodged an FBT return last year, now is the time to ensure you have all the necessary documentation ready, including:
- Vehicle logbooks
- Odometer readings
- Records of entertainment expenses
- Details of any employee reimbursements or personal expenses paid by the business
It is also worth performing a completeness check. For example, if last year only included a car benefit, consider whether additional benefits were provided this year.
If You Didn’t Have FBT Last Year
Not having an FBT liability in a previous year does not automatically mean the same will apply this year.
Changes in business operations, providing vehicles to staff, covering personal expenses, or hosting entertainment events can all create potential FBT obligations.
Why Lodging an FBT Return Matters
An important point many businesses overlook is the ATO review period.
If an FBT return is lodged, the ATO generally has two years to review the position. However, if no return is lodged when one should have been, there is effectively no time limit for the ATO to revisit prior years.
Need Help Before 31 March?
FBT can be complex, and reviewing the position before the end of the FBT year can help identify issues early and avoid unnecessary costs.
If you are unsure whether your business has an FBT obligation or would like assistance reviewing your records before 31 March 2026, our team are more than happy to help.