ATO Announces FBT Audit Crackdown.

The Australian Taxation Office (ATO) has announced an increased focus on Fringe Benefits Tax (FBT) compliance, with a significant uptick in audits and reviews expected over the coming FBT years. This renewed crackdown signals that employers should be reviewing their FBT positions carefully to ensure they are accurate, well-documented and defensible.

Why the ATO Is Focusing on FBT

FBT remains a complex and often misunderstood area of tax. The ATO has identified ongoing errors and omissions in employer reporting, particularly where businesses incorrectly assume certain benefits are exempt or fail to capture benefits provided informally.

With improved data-matching capabilities and greater visibility over payroll, vehicle, and expense data, the ATO is now better equipped to identify discrepancies between what employers report and what employees actually receive.

Key Areas Under Scrutiny

The ATO has indicated that audits will focus on benefits that are commonly misreported or overlooked, including:

Motor vehicles and car expenses

Incorrect application of the operating cost or statutory formula methods, missing logbooks, and private use not properly identified continue to be a major risk area.

Work-from-home and electronic devices

Items such as laptops, mobile phones, and home office equipment may attract FBT if exemption conditions are not met or if multiple items are provided incorrectly.

Entertainment and staff benefits

Meals, gifts, staff functions, and client entertainment are frequently misclassified, particularly where businesses incorrectly assume minor benefits exemptions apply automatically.

Employee reimbursements and allowances

Reimbursing private expenses or paying allowances without understanding their FBT treatment can easily result in underreported liabilities.

Salary packaging arran

gements

The ATO is paying close attention to whether benefits provided under salary sacrifice arrangements are being valued and reported correctly.

Common Mistakes the ATO Is Seeing

Some of the most common FBT errors identified by the ATO include:

- Not lodging an FBT return at all when one is required

- Assuming benefits are “business-related” without sufficient evidence

- Inadequate or missing documentation (logbooks, declarations, invoices)

- Incorrect use of exemptions or concessions

- Failing to review FBT positions year-to-year as business operations change

Even well-intentioned businesses can fall into these traps, particularly as working arrangements and employee benefits evolve.

What This Means for Employers

With increased audit activity, the cost of getting FBT wrong can be significant. In addition to unexpected tax liabilities, penalties and interest charges may apply where the ATO identifies non-compliance.

The ATO has made it clear that businesses that are proactive, transparent, and willing to correct mistakes early are far better placed than those that wait until an audit occurs.

Steps You Should Take Now

To reduce your risk, we recommend employers take the following steps before the end of each FBT year:

- Review all benefits provided to employees, including informal or one-off benefits

- Ensure logbooks, declarations, and supporting documents are up to date

- Check whether exemptions genuinely apply rather than relying on assumptions

- Reassess vehicle usage, particularly where work patterns have changed

- Seek advice before introducing new employee benefits or salary packaging arrangements

How We Can Help

FBT does not need to be stressful, but it does require careful attention. We can assist with:

- Reviewing your current FBT exposure

- Identifying overlooked benefits

- Preparing or reviewing FBT returns

- Assisting with ATO audits or reviews

- Implementing practical systems to reduce future risk

If you would like to discuss your FBT obligations or arrange a review, please contact our team. Being proactive now can help avoid costly surprises later.