Fringe Benefits Tax

ATO Increasing Focus on Fringe Benefits Tax

The Australian Taxation Office (ATO) continues to increase its focus on Fringe Benefits Tax (FBT) compliance, particularly for small and medium-sized businesses.

The ATO is using enhanced data-matching and targeted reviews to identify businesses that may be providing employee benefits but are not lodging FBT returns or correctly reporting those benefits.

Some of the key areas currently attracting attention include:

• Company vehicles; including Utes – particularly where businesses claim exemptions for work vehicles but there is significant private use

• Employee contributions – ensuring after-tax contributions are correctly recorded and applied to reduce FBT liabilities

• Logbooks and record keeping – incomplete or outdated logbooks or declarations are a common issue during reviews

• Living-away-from-home allowances (LAFHA) – the ATO is checking eligibility and supporting documentation

• Employee benefits linked to remote or hybrid work arrangements 

• Entertainment benefits  

Vehicle benefits remain one of the most common areas where businesses make mistakes, and the ATO is increasingly cross-checking vehicle registration data, payroll information and FBT lodgements to identify potential compliance issues.

Avoid Future ATO Risk: Lodge an FBT Return

Even if your business has no FBT liability, lodging an FBT return can be important for a few key reasons:

1. It Starts the Amendment Time Limit
   Once an FBT return is lodged, the Australian Taxation Office generally has four years to review or amend that return. If no return is lodged, the ATO may review those benefits at any time in the future, leaving your business exposed to potential tax, interest and penalties.

2. It Helps Manage Risk
   Lodging confirms to the ATO that your business has reviewed any benefits provided during the FBT year and assessed whether there is a liability. This is a positive consideration when the ATO are determining the level of compliance risk of a taxpayer.

3. It Provides Certainty and Peace of Mind
   Many everyday business activities can unintentionally trigger FBT — especially company cars, entertainment expenses, or reimbursements of personal costs. Reviewing your business transactions and preparing a tax return for lodgement ensures these items are properly considered and documented.

Given the increasing focus on this area and the growing risk of ATO audit, it is our advice that all clients that provide any form of fringe benefit should now lodge a fringe benefits income tax return.

You will shortly receive additional information from our office regarding opting in to FBT return lodgement.