31 March 2026 signifies a key date for employers as the end of the 2026 Fringe Benefits Tax (FBT) year.
FBT is an employer-paid tax which arises when the employer provides their employee with benefits that are not salary or wages.
Common types of fringe benefits provided by employers of all sizes include vehicles, study reimbursements and meal entertainment benefits.
The key dates for employers to keep in mind are:
- 31 March 2026 – End of the 2026 FBT year
- 21 May 2026 – Due date for lodgement of the 2026 FBT return without a tax agent
- 25 June 2026 – Due date for lodgement of the 2026 FBT return with a tax agent
In addition to significant legislative changes relating to vehicles, the ATO has continued to reduce the administrative burden for FBT, particularly relating to record-keeping obligations through alternative record-keeping requirements. As the regulatory body for FBT, the ATO has highlighted the following behaviours as attracting their attention:
- Lodgement of a nil return
- Employee contributions, particularly relating to the application of an estimated employee contribution or the amendment of past returns by including employee contributions
- Provision of motor vehicles, including the incorrect classification of motor vehicles, treating private use as business use and not maintaining a valid logbook
Three recent updates employers should be aware of in the preparation of the FBT returns for the 2026 FBT year are highlighted in this article.
Plug-in hybrid vehicles
The 2026 FBT year signifies the first year of the application of the sunset provision for plug-in hybrid vehicles (PHEV) no longer being treated as an exempt car fringe benefit under section 8A of the Fringe Benefits Tax Assessment Act 1986 (Cth). While new arrangements will no longer be exempt, a caveat to the exemption is that PHEVs which were already in a financially binding commitment prior to 1 April 2025 will continue to be exempt. However, in the instance the financially binding commitment is changed, the FBT exemption for PHEVs will no longer apply and the vehicle will be taxable.
Directors and fringe benefits
The Federal Court decision of Federal Commissioner of Taxation v SEPL Pty Ltd ATF SFT Trust decided on 5 June 2025 has expanded the definition of ‘in respect of employment’ for FBT purposes. The single judge decision held that even in the absence of a formal employment contract, non-cash benefits provided in a manner equivalent to salary or wages could be considered as benefits in respect of employment and therefore within the scope of the FBTAA.
In the case of SEPL, the exclusive use of luxury vehicles by the Directors of the company were determined to be non-cash benefits provided in a manner equivalent to salary or wages and therefore within the scope of the FBTAA.
This poses risks for many people who use companies for asset protection and retain a director position of the company. Even where Directors do not receive salaries or wages, exclusive use of assets may be considered a fringe benefit provided in respect of the Director’s employment with the company. This not only increases the tax payable for the company, but also impacts the Director’s income tax returns relating to income test thresholds.
Electric home charging vehicle rates
On 1 February 2024, the ATO published the Practical Compliance Guide PCG 2024/2 to provide guidance relating to how employees with FBT obligations and individuals with work-related car expenses can calculate their electricity costs when charging electric vehicles at home. The application of the home charging vehicle rates impact the calculation of residual fringe benefits for calculating the employee’s contribution as a deduction and also in instances when calculating the cost of fuel for vehicle operating costs.
Motor vehicles are a common benefit provided by employers, but they are also attracting the attention of the ATO due to significant levels of non-compliance and recent legislative changes.
Need assistance with FBT compliance?
If you have any uncertainty relating to the potential application of FBT on your company operations, FBT impacts on proposed tax structuring for asset protection purposes, or are seeking advice to meet the record-keeping requirements, please contact Coleman Greig’s Tax & Superannuation team.
