FBT year end 2026: key employer actions and ATO focus areas

FBT year end 2026: key employer actions and ATO focus areas

As the 31 March FBT year-end approaches, now is the time to check your fringe benefits, tighten records, and confirm you’re aligned with the ATO’s current focus areas - especially motor vehicles, entertainment and EV/PHEV changes.

Introduction

The fringe benefits tax (FBT) year ends on 31 March 2026. With ATO compliance activity increasingly supported by data-matching, employers should use the year end as a prompt to confirm that benefits have been correctly identified, valued and supported by appropriate records.

A fringe benefit is a non-cash benefit an employer provides to an employee (or their associate) in connection with employment. Common examples include:

• Providing a car that can be used privately.
• Providing food and drink in certain circumstances.
• Providing car parking to an employee at or near the workplace.
• Providing a low or interest-free loan to an employee or associate.

Good record keeping does more than reduce penalty risk. It supports the position you’ve taken (for example, business vs private use, valuation methods and exemption eligibility) and can help reduce FBT by substantiating employee contributions and other reductions.

Below is a practical summary of key focus areas and actions for the 2026 FBT year.

1. 2026 change: electric vehicles and plug-in hybrid electric vehicles (PHEVs)

Key changes and reminders for the 2025–26 FBT year include:

• From 1 April 2025, PHEVs are no longer treated as a zero or low emissions vehicle for the electric car FBT exemption. New arrangements entered into from 1 April 2025 are generally not eligible for the exemption.
• Transitional rules may continue to apply for certain existing PHEV arrangements in place before 1 April 2025.
• For eligible battery electric vehicles, a shortcut method may be available to calculate home charging electricity costs at 4.20 cents per kilometre (where applicable).

2. 2026 ATO review focus: Car Fringe Benefits

Car fringe benefits remain a primary ATO focus area. Common issues include treating private travel as business travel, failing to report private use, and relying on incomplete or invalid records (for example, outdated logbooks).

As part of your year-end review, consider whether vehicles were made available to employees and whether your records support the treatment adopted, including:

• Confirm logbooks are current, cover a continuous 12-week period, and are updated at least every five years (or earlier if usage patterns change).
• Record vehicle odometer readings at 31 March 2026.
• Review vehicle specifications and private use to confirm whether the limited private use exemption for eligible commercial vehicles applies (assumptions for certain utes can be incorrect).

3. 2026 ATO review focus: Meal Entertainment benefits

Entertainment benefits remain one of the most commonly misunderstood FBT areas. As a general rule, meal entertainment (for example, meals at restaurants) is not income tax deductible and GST credits are not claimable unless the expense is treated as subject to FBT.

ATO review activity is often triggered where entertainment is treated as deductible in the income tax return, but the same costs are not captured (or are inconsistently treated) in the FBT return.

Employers should consider the following steps:

• Identify entertainment-related expenses provided to employees (meals, functions, tickets) and maintain records of who attended and in what capacity.
• Select the most appropriate valuation method (for example, actual method vs 50:50 split). If using the actual method, detailed attendee records are essential.
• Apply the $300 minor and infrequent exemption (where available) by considering not only the value, but also the frequency and regularity of benefits provided. Note: This exemption is only available for meal entertainment where the actual method is used.
• Review Christmas parties and staff events held during the year, as the FBT outcome can change depending on the type of event, attendees and associated costs.

4. 2026 FBT Lodgement and Payment Deadlines

FBT returns are due for lodgement and payment by 21 May 2026 for paper lodgements, or 25 June 2026 if lodging electronically through a registered tax agent.

Conclusion

With the 2026 FBT year-end approaching, a proactive review of benefits and supporting documentation can reduce the risk of unexpected liabilities. Given the ATO’s continued focus on record keeping (particularly for car fringe benefits) employers should ensure treatments adopted are supported by all necessary documents and are consistent across income tax, GST and FBT reporting.

If you would like support reviewing your FBT position or preparing your 2026 FBT return, please contact your Baumgartners adviser. We can help you navigate the requirements and identify practical opportunities to manage and, where available, minimise your FBT exposure.