As we approach the end of the Fringe Benefits Tax (FBT) year on 31 March 2026, now is the time for employers to review benefits provided to employees and ensure compliance.
FBT is a tax paid on non-cash benefits provided to employees (or their family members) in addition to their salary or wages. If you provide perks like company cars, gym memberships, car parking or entertainment, you may have an FBT liability.
Here are the key areas of focus for this FBT season:
1. High focus area: Personal use of work vehicles
The ATO is increasing its focus on employers who overlook or misreport FBT on the private use of work vehicles, including dual cab utes.
- The trap: Even if a vehicle is “commercial” in nature, if it is used for private purposes (including parking at an employee’s home) it is likely a taxable fringe benefit.
- Action: Ensure you are recording odometer readings as of 31 March and reviewing log books.
2. Important change: Plug-in Hybrid Electric Vehicles (PHEVs)
Changes to electric car exemptions mean that from 1 April 2025, most PHEVs are no longer eligible for the zero/low emissions FBT exemption. If you provide a PHEV for private use, you may have new FBT obligations for the 2025-26 year.
3. Record keeping improvements
From 1 July 2024, businesses can choose to use existing business records in place of some statutory evidentiary documents, such as travel diaries or employee declarations, provided they meet ATO requirements. This aims to reduce the compliance burden.
4. Christmas parties and gifts
If you provided gifts, hampers or held staff parties over the festive season, these may be exempt under the “minor benefits” rule if they cost less than $300 per employee, are provided infrequently and meet other specific criteria.
5. 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 deduction but this can be a problem if it isn’t recognised as a fringe benefit provided to employees. Expenses relating to entertainment such as a meal in a restaurant are generally not deductible and no GST credits can be claimed unless the expenses are subject to FBT.
Let’s say you’ve taken a client out to lunch and the amount per head is less than $300. If your business uses the ‘actual’ method for FBT purposes, then there often won’t be any FBT implications. This is because benefits provided to clients are not subject to FBT and minor benefits (i.e., value of less than $300) provided to employees on an infrequent and irregular bases are generally exempt from FBT. However, no deductions should be claimed for the entertainment and no GST credits would normally be available either.
Note: If the business uses the 50/50 method, then 50% of the meal entertainment expenses would be subject to FBT (the minor benefits exemption would not apply). As a result, 50% of the expenses would be deductible and the business would be able to claim 50% of the GST credits.
6. Not lodging FBT returns
The ATO is concerned that some employers are not lodging FBT returns when required to.
If your business employees 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 an 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.
Make sure you’ve reviewed the FBT client questionnaire when we send it to you!
Key deadlines
- FBT Year End: 31 March 2026
- Return Lodgement & Payment: 21 May 2026
- Tax Agent Lodgement: If using a registered tax agent, the deadline is generally 25 June 2026.
Action required: Lodge a “Nil” return
Even if you believe you have no FBT liability, it is highly recommended to lodge a “nil” return. If no return is lodged, the ATO has no time limit on reviewing your previous FBT positions.
IMPORTANT INFORMATION
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from your financial adviser and seek tax advice from your MartinCo accountants. Information is current at the date of issue and may change.
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