As the 2026 Fringe Benefits Tax (FBT) year comes to a close and lodgement season approaches, it is important for business owners and employers to understand where the Australian Taxation Office (ATO) is focusing its attention.

Recent audit activity and updated ATO guidance highlight a number of common business practices now under increased scrutiny, particularly where employers rely on assumptions or incomplete records.

In this article, Adam Brush and Kristin Dimakis outline the key FBT risk areas to be aware of.

Car fringe benefits remain a major audit focus

Motor vehicle benefits continue to be one of the most closely monitored areas by the ATO.

Common issues that attract attention include:

• Claiming 100 percent business use of vehicles without accounting for private use
• Failing to maintain valid logbooks
• Keeping inaccurate or incomplete logbook records
• Incorrectly applying FBT exemptions

To meet ATO requirements, a valid logbook must include:

• Start and end date
• Start and end odometer readings
• Kilometres travelled for each trip
• A clear and specific reason for each journey, not simply “work” or “personal”
• A continuous 12-week recording period

Electric vehicles and plug-in hybrid changes

From 1 April 2025, plug-in hybrid electric vehicles (PHEVs) are no longer exempt from FBT.

Employers must now ensure they correctly calculate electricity and running costs in line with ATO guidance. This requires maintaining appropriate records, including:

• Actual petrol costs for the FBT year
• Average petrol rate
• Average fuel consumption, sourced from the manufacturer or a reliable reference
• Total kilometres travelled based on odometer readings

Some electric vehicle charging systems can track home electricity usage, allowing businesses to separate vehicle-related consumption from general household usage. However, electricity generated from solar panels cannot be claimed.

Electric vehicles continue to use the 4.2 cents per kilometre rate. This rate now also applies to PHEVs under the updated ATO guidance for the 2026 FBT year.

Meal entertainment under scrutiny

The ATO continues to review how employers treat meal entertainment and employee amenities.

Key risk areas include:

• Incorrectly classifying food and drink as non-entertainment
• Misapplying the $300 minor benefits exemption
• Providing meals to employees working from home or via food delivery services

Even minor or infrequent benefits can attract FBT if they are provided regularly or form part of an employee’s overall remuneration.

Record-keeping is critical

A consistent theme across ATO audits is inadequate documentation.

Employers must maintain clear and accurate records to support their FBT position, including:

• Vehicle logbooks
• Travel diaries
• Documentation supporting exemptions and business use percentages

Failure to meet substantiation requirements may result in penalties, interest charges, or default assessments.

Understanding your FBT obligations

Fringe benefits tax is often overlooked, but it can have significant financial implications if not managed correctly.

Understanding your obligations and maintaining proper records is essential to reducing risk and ensuring compliance.

Speak to the tax and financial experts

At LDB, our accountants and tax advisors, based in Blackburn in Melbourne’s City of Whitehorse, can help you navigate your FBT obligations with confidence.

Call us on (03) 9875 2900 or get in touch online to discuss your situation. You can also follow LDB on LinkedIn for updates on tax, property and financial advice.