FBT time and updated ATO compliance
Recent ATO crackdowns on nil and non-lodgers, together with expanded data matching and review activities, indicate that fringe benefits tax (FBT) obligations can no longer be treated as an afterthought. Increased ATO scrutiny of common compliance errors, alongside two landmark case decisions, is materially shaping the FBT landscape for the 2026 FBT year and beyond.
The ATO will be increasing its scrutiny in the areas of applying the “minor and infrequent” exemption, entertainment, dual cab utes, business travel, benefits to business owners, and journalised employee contributions to name a few. Additionally, the ATO’s recent wins on appeals at the Federal Court confirm that benefits provided to business owners risk potential FBT liability.
The minor and infrequent FBT exemption allows small, occasional benefits under $300 to be exempt from FBT if they are provided irregularly and it would be unreasonable to treat them as fringe benefits. Common benefits that may qualify for the minor benefits exemption include off premises meal entertainment (such as meals at cafés or restaurants) where the cost is less than $300 per person (incl. GST) and provided infrequently, occasional small gifts or vouchers under $300 that are not provided on a regular basis, and light refreshments supplied in the workplace that satisfy the value and infrequency requirements. Each benefit must be assessed on its own facts, having regard to frequency, total value, and whether any associated benefits are provided.
These benefits risk being ineligible for the exemption where they are less than $300 but are not infrequent. Examples include instances where employees are regularly given gift cards as part of a direct reward for the employee’s services, or where a manager or director is frequently incurring meal entertainment as part of their role to promote their organisation. In these instances, the “infrequency” criteria will not be met and applying the minor benefit exemption could expose employers to unexpected FBT liabilities.
Another common myth is that dual cab utes are automatically exempt from FBT. However, this is not always the case. To qualify for FBT exemption, two conditions must be met. The dual cab ute must be:
An eligible vehicle, which means it is designed to carry: (a) a load of one tonne or more; (b) more than eight passengers (including the driver); or (c) a load under one tonne and not be primarily designed for carrying passengers.
Private use must be limited (i.e., minor, infrequent and irregular), such as the occasional trip to the tip or helping a mate move house.
Therefore, if a work dual cab ute "doubles as the family taxi or is used for weekend personal trips", it is not exempt from FBT. Where an employee's personal use of the dual cab ute does not meet both of the above exemption conditions, then there will be FBT implications and the private use of the vehicle must be accounted for correctly and in line with current compliance requirements. This would include keeping an accurate log book.
These developments highlight the need for increased vigilance for employers providing certain benefits to their staff. This requires a focus not only on meeting reporting and payment requirements, but also on ensuring that FBT exposures are accurately assessed, and all relevant benefits are identified.
Our office will be in touch with all business clients on further FBT specific information over the coming months, in light of these updates and to assist with managing the on-going compliance in this complex area.
If you would like to discuss these matters further, please contact out office.