FBT 2026 – Key ATO Focus Areas

The Fringe Benefits Tax (FBT) year runs from 1 April 2025 to 31 March 2026.

Employers who provide motor vehicles or other benefits to employees may have FBT obligations and with the end of the FBT year approaching, it’s time to review benefits provided to employees and ensure proper record keeping and documentation is in place.

Fringe benefits are non-cash benefits provided to employees or their associates (family members or entities). The most common example is providing a work vehicle that’s used for personal purposes, which includes when it’s garaged at an employee’s home.

ATO Key FBT Focus Areas

The ATO continues to focus on compliance relating to car fringe benefits, record-keeping and entertainment with scrutiny on plug-in hybrids (PHEVs) and private vehicle use. Key focus areas include checking for valid logbooks, ensuing proper classification of benefits, and reviewing employee contributions.

The ATO are focusing on employers who may be overlooking and misreporting FBT on the private use of work vehicles, including:

• failing to lodge an FBT return when they’re required to
• mistakenly assuming that private use of a dual cab ute is automatically exempt from FBT
• incorrectly claim vehicle exemptions
• not keeping adequate records, such as valid logbooks to support the calculations or exemptions claimed
• incorrectly treat private use as business use, or avoid apportioning private use of a vehicle
• not keeping accurate and valid records to substantiate their FBT position or support any exemptions they’ve claimed.

The ATO are continuing to use sophisticated data matching and analytics to target high-risk areas and identify businesses that aren’t meeting their obligations, so it’s important for employers to ensure they’re FBT compliant.

Changes affecting plug-in hybrid electric vehicles (PHEVs)

If you provide PHEVs to employees for personal use, the following changes may affect your obligations for this FBT year.

Electric car exemption eligibility

Since 1 April 2025, PHEVs are no longer eligible for the electric car exemption, unless you meet the specific eligibility requirements relating to existing arrangements. This means you may now have an FBT liability for the 2026 FBT year, if you’re providing a PHEV for employees’ personal use.

Shortcut home-charging method
If your employees charge PHEVs at home, you can use the shortcut method (rate of 4.2 cents per kilometre) which makes it easier to calculate home-charging electricity costs. You can opt to use this method if you’re eligible, or you can continue to use the actual electricity costs.

Employee contributions

An employer can reduce their FBT liability by having employees contribute towards the cost of providing a fringe benefit.

Employee contributions (or recipient’s contributions) are payments made by employees to employers from after-tax income to reduce the taxable value of fringe benefits. An employee can also make an employee contributions towards a car fringe benefit by paying a third party for some of the operating costs of the car (such as fuel).

Employee contributions must be made by 31 March and if paid to the employer, are treated as GST taxable supplies and assessable income of the employer.

Providing exempt or concessional benefits

There are a range of exemptions and concessions which apply to fringe benefits, including specific exemptions and concessions that apply for some not-for-profit organisations.

Some common exemptions may apply to:

• work-related items such as portable electronic devices and tools of trade.
• minor benefits with a notional taxable value of less than $300 and it would be unreasonable to treat the benefit as a fringe benefit
• car parking benefits provided by small businesses food or drink consumed on your business premises.

Remember to check the eligibility criteria for each exemption to ensure that all necessary conditions are met to confirm the exemption applies.

The information contained in this article is general in nature and is not intended to be advice.
This article is general in nature, and does not constitute financial product advice or technical advice. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Bentleys and its employees are not liable for actions taken based on this information.