If your business is failing to meet its fringe benefits tax (FBT) obligations, you could be targeted by the Australian Taxation Office (ATO) for a compliance review or audit. Missing records, inaccurate reporting and lodging incorrect returns are some of the red flags that may trigger enforcement action.
The ATO uses sophisticated analytical tools such as data matching and risk modelling to scrutinise FBT records, with a focus on nil lodgement, employee contributions and motor vehicles. This means that employee perks, such as a company car or gym membership, can become a significant financial and regulatory liability if not meticulously documented and correctly reported.
Preparation is the best defence – a proactive check can help identify any gaps, reduce risk and ensure your business is ready for potential audits. Being 'audit-ready' will not only help you avoid costly consequences (including retrospective assessments and administrative penalties), it will also optimise the value of the benefits you provide to your team.
Reminder: The end of the FBT year is 31 March 2026. The deadline to lodge your FBT return and pay any tax due is 21 May (or 25 June if lodging electronically through a tax agent).
FBT checklist
1. Review your fringe benefits
Start by identifying all fringe benefits provided to employees, including:
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company cars and car parking
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entertainment expenses (meals, events, gifts)
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employee loans and debt waivers
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housing and accommodation benefits
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salary packaging arrangements
- gym memberships.
Ensure all benefits are recorded accurately and align with ATO guidelines.
2. Check your FBT declarations and documentation
Proper documentation is critical in an FBT audit. Ensure you have:
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employee declarations for relevant benefits
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logbooks for company vehicles
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travel diaries for work-related trips
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tax invoices and receipts for entertainment expenses
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any supporting documentation required for salary sacrifice agreements.
3. Assess your FBT exemptions and concessions
Some benefits may be exempt from FBT or subject to concessions, such as:
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work-related portable electronic devices
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minor and infrequent benefits under $300
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benefits provided to employees working in remote areas.
Review your records to confirm whether you have applied these exemptions correctly.
4. Ensure accurate FBT calculations
Incorrect calculations can lead to unexpected liabilities. Verify that:
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the correct FBT rates and gross-up factors are applied
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employee contributions are correctly accounted for
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GST-inclusive values are considered where applicable.
5. Conduct an internal FBT risk assessment
An internal audit can highlight potential compliance gaps. Key areas to check include:
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consistency of reporting across different employee benefits
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correct classification of benefits (e.g. entertainment vs meal allowances)
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alignment with ATO’s latest rulings and updates.
6. Prepare for an ATO audit
If selected for an ATO review, having clear and organised records can make the process smoother. Keep:
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FBT returns and supporting work papers
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detailed records for the past five years
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evidence of tax planning strategies and advice received.
Have you noticed our #FridayExpertTips... here's one that relates to #FBT
“Proactively lodging a fringe benefits tax return – even if no tax is due – can limit the ATO's audit window to three years, whereas failing to lodge leaves your business open to indefinite scrutiny."
More information
Seek professional advice
Azure Group can ensure your business complies with FBT guidelines and can help you prepare for a potential audit by the ATO. Visit our FBT Services page or contact our expert Tax team.
This article is intended to provide general information only and is not to be regarded as legal or financial advice. The content is based on current facts, circumstances and assumptions, and its accuracy may be affected by changes in laws, regulations or market conditions. Accordingly, neither Azure Group Pty Ltd, nor any member or employee of Azure Group or associated entities, undertakes responsibility arising in any way whatsoever to any persons in respect of this alert or any error or omissions herein, arising through negligence or otherwise howsoever caused. Readers are advised to consult with qualified professionals for advice specific to their situation before taking any action.
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