As the FBT year ends on 31 March, now is a timely reminder for business owners to pause and check whether any fringe benefits have been provided to employees during the year — even unintentionally.
The Australian Taxation Office (ATO) has flagged that FBT, particularly motor vehicle use, remains a key focus area this year, with increased attention on businesses that may be overlooking or incorrectly reporting their obligations.
What is FBT (and why it’s often missed)?
Fringe Benefits Tax applies when an employer provides non‑cash benefits to employees or their associates, in addition to salary or wages. Many small businesses don’t realise they are providing fringe benefits — which is why FBT is so commonly missed.
The most common example is the private use of a work vehicle, including situations where the vehicle is garaged at an employee’s home, even if it’s primarily used for work.
Motor vehicles: the biggest FBT trigger
Motor vehicle benefits continue to be the most frequent FBT issue the ATO sees. This includes:
- Company cars used for any private travel
- Vehicles taken home overnight
- Work vehicles used on weekends or for personal errands
The ATO has confirmed it will increase its focus on employers who overlook or misreport FBT relating to private vehicle use, particularly where businesses assume “minor” or “occasional” use doesn’t count.
If your business provides vehicles to staff, it’s important to review usage, records and assumptions each year, rather than relying on what was done in the past.
Electric vehicles and plug‑in hybrids: important changes
There have also been significant changes for electric and hybrid vehicles that may catch business owners off‑guard.
The ATO has reminded employers that plug‑in hybrid electric vehicles (PHEVs) are no longer automatically eligible for the electric car FBT exemption from 1 April 2025, unless very specific eligibility requirements are met.
This means businesses that continued providing PHEVs for employee private use may now face an unexpected FBT liability for the 2025–26 FBT year.
If your business has recently transitioned vehicles as part of sustainability or tax planning strategies, this is an area worth reviewing carefully.
Record‑keeping matters more than ever
Another key ATO focus this year is poor or incomplete record‑keeping, including:
- Lodging a nil FBT return when fringe benefits were actually provided
- Inadequate logbooks or usage records
- Missing or invalid documentation to support exemptions or concessions claimed
- Incorrect reporting of employee contributions used to reduce FBT payable
The ATO has made it clear that getting it right now can help avoid audits, penalties and interest charges later.
Why we raise this now
FBT often feels complex and easy to push aside — but addressing it before 31 March gives businesses the opportunity to:
- Confirm whether an FBT return is required
- Fix issues early, rather than after ATO contact
- Ensure records are in order while the details are still fresh
- Avoid surprises when tax time comes around
If you’re unsure whether FBT applies to your business this year, now is the perfect time to reach out.