As we approach the end of the Fringe Benefits Tax (FBT) year, we would like to highlight some important developments for 2026. The ATO has been allocated a significant audit and compliance budget, and we are seeing continued focus on fringe benefits, particularly in relation to motor vehicle benefits and meal entertainment. With this increased scrutiny, it is essential that you are aware of what FBT exposure your business may have and your FBT positions are well supported, accurate, and compliant.
Below, we’ve highlighted several key areas that we would like to bring to your attention:
1. Motor Vehicles Provided to Non-Employee Directors & Shareholders
It was commonly believed that if you had no employees, there would be no FBT exposure. This is not true; the most common example of this is the provision of motor vehicles to individuals who are not strictly “employees,” such as directors or shareholders.
The ATO is paying closer attention to:
- Whether these individuals fall within the FBT regime
- How vehicles are being used (business vs private use)
- Whether appropriate documentation supports the treatment adopted
It is important to note that even if a director or shareholder is not on payroll, benefits provided to them can still attract FBT. Careful classification and documentation are essential to avoid unexpected liabilities.
2. Meal Entertainment
Meal entertainment continues to be a complex and commonly misunderstood area. Common examples include meals with employees at restaurants with alcohol and catering for business events (EOFY and Christmas parties). Most meal entertainment expenses should qualify for certain exemptions depending on the value of the benefit and the frequency; however, it is good to be aware of your FBT exposure.
The ATO acknowledges that your businesses meal entertainment FBT exposure is not only from expenses incurred by the business but may arise from third parties such as:
- Directors personally incurring these expenses
- Client gifts
3. Importance of Motor Vehicle Record Keeping
Accurate record keeping remains one of the most critical aspects of FBT compliance, particularly for motor vehicles.
To support your position that the vehicle has minor and infrequent private usage, you should ensure:
- Logbooks are current, valid and reflects the business usage (valid for 5 years, but must reflect actual usage)
- Odometer readings are recorded at the start and end of each FBT year
- Supporting documentation/declarations for any exemptions claimed (e.g. minor, infrequent private use)
The ATO has indicated that poor or incomplete records will not be accepted, which may result in higher taxable values being applied.
What’s Next?
Over the coming days, we will be issuing FBT engagement letters via Ignition.
These letters will give you the opportunity to:
- Confirm whether fringe benefits were provided during the 2026 FBT year (e.g. cars, entertainment, loans, parking, or other non-cash benefits); and
- Advise whether an FBT return is required based on your business’s circumstances.
Once we receive your confirmation, we’ll proceed with the appropriate action, either preparing and lodging an FBT Return or preparing a Nil FBT Return where no benefits have been provided.
We’re Here to Help
FBT can be complex, and we’re here to make it simple. If you’re unsure whether certain benefits fall under the FBT rules, or you need guidance in reviewing your position, don’t hesitate to contact us.
Keep an eye out for your FBT engagement letter via Ignition in the coming days.
If you have any immediate questions or concerns, please contact your MGI Adelaide contact
