In the lead up to the end of the FBT year, Wolters Kluwer hosted the Fringe Benefits Tax 2026 — Annual Compliance Update webinar. Presented by Jen Madigan, Director of Risk & Strategy, Employer Obligations at the ATO and a panel of FBT experts, this year’s update focused on electric vehicles (EVs), recent FBT cases, compliance and what attracts the ATO’s attention.
Table of contents
- Electric vehicles
- FBT cases update
- Compliance and what attracts the ATO’s attention
- Four key compliance steps
- Further information
Electric vehicles
Statutory review of the electric car discount
As required by the Treasury Laws Amendment (Electric Car Discount) Act 2022, the government has commenced a review of the electric car discount which provides the FBT exemption and tariff exemption to eligible cars.
The review will consider the first 3 years of the electric car discount’s operation, and in particular, the effectiveness of the electric car discount in encouraging the uptake of cars that are zero or low emissions vehicles. The review will also consider whether the electric car discount should continue, and, if so what types of vehicles should attract the discount. Further, the review will consider:
- the role of the electric car discount in supporting early adoption of EVs
- changes in the electric car market, including price, choice and availability of new and second-hand EVs
- changes in EV charging infrastructure and support services
- the cost of the electric car discount in achieving its objectives, and
- consumer acceptance of EVs.
Public submissions for the review opened on 12 December 2025 and closed on 6 February 2026.
Plug-in hybrid electric vehicles
ATO guidance on home charging costs updated
Practical Compliance Guideline PCG 2024/2 has been updated to outline a method for calculating electricity costs when charging a plug-in hybrid electric vehicle (PHEV) at an employee’s or individual’s home from the 2024–25 FBT year or income tax year. Previously, the Guideline only provided a method for calculating home electricity costs for fully electric EVs using the “EV home charging rate” of 4.20 cents per kilometre.
Employers who meet the requirements set out in para 8 of the Guideline and choose to rely upon the method provided for PHEVs must obtain the following information:
- Actual petrol costs for the FBT year.
- Average petrol rate, ie the average cost per litre of petrol purchased. Employers can calculate this themselves using a reasonable basis or by using published information such as the Australian Institute of Petroleum's annual retail price data.
- Condition B test cycle fuel economy figure which is comparable to the vehicle in standard “hybrid driving mode”. This rate will need to be obtained from the vehicle manufacturer. Should the petrol consumption rate become available from a different, more accessible and reliable source, employers are not restricted to only using the Condition B rate. The marketed petrol consumption rate of PHEV's is not an alternative reliable source because it assumes extremely low petrol kilometres.
- Total kilometres travelled during the FBT year using odometer readings.
The update to the Guideline also contains a transitional approach for PHEVs for the 2024–25 FBT and income tax years. In particular, if odometer records have not been maintained for PHEVs, as at the start or end of the 2024–25 FBT or income tax years (ie as at 1 April or 1 July 2024, or 31 March or 30 June 2025), a reasonable estimate may be used based on service records, logbooks or other available information. Similarly, if records substantiating actual petrol costs have not been maintained for PHEVs, as at the start of the 2024–25 FBT or income tax years (ie as at 1 April or 1 July 2024), a reasonable estimate may be used based on available information.
The ATO will continue to review whether the EV home charging rate of 4.20 cents per kilometre reflects electricity expenses incurred where EVs are charged at home. If an employer considers that the EV home charging rate is less than what their employee is being charged, they can use the actual cost instead of that rate.
End of FBT exemption for PHEVs and grandfathering
The FBT exemption for PHEVs ended on 31 March 2025. Given this change, employers who have provided their staff with a PHEV for private use for the 2025–26 FBT year should ensure that they are calculating and reporting their FBT correctly.
The law provides for grandfathering of existing PHEV arrangements, and an employer can continue to apply the exemption if both of the following requirements are met:
- The PHEV was used, or available for use, before 1 April 2025 (and that use, or availability for use, was exempt).
- There is a financially binding commitment to continue providing private use of the vehicle or making the vehicle available for private use on and after 1 April 2025 (but any optional extension of the agreement is not considered binding).
Some changes to pre-existing commitments result in a new commitment and therefore the employer will no longer be eligible for the FBT exemption from that time. These include optional extensions to the agreement, breaks in novation agreements, changes to the financial obligations under the lease, and changes to employer for FBT purposes.
Tax professionals should identify employer clients with pre-existing PHEV arrangements, verify all necessary documentation is in place including contracts, advice letters and any correspondence that confirms the binding nature of the commitment. Employer clients should also be advised to maintain comprehensive records.
For more information, see FBT on plug-in hybrid electric vehicles.
FBT cases update
Toowoomba Regional Council
The Federal Court’s decision in Toowoomba Regional Council v FC of T challenges the ATO’s interpretation of a “commercial parking station”. The case concerned whether a shopping centre car park, which offered free parking periods and discounted rates, was a “commercial parking station” as defined in s 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). This is relevant when considering whether a car parking benefit is provided to employees in accordance with s 39A of the FBTAA.
The Federal Court (Logan J) found in favour of the taxpayer. Focusing on the profit-making aspect of the definition of “commercial”, the court held that the shopping centre car park was not a commercial parking station as it was being operated to a different end to a commercial car parking facility, ie it was being operated to complement the operation of the shopping centre. Although the car park was being operated in trade or commerce, when considered as a car parking facility alone, the range of free parking was inconsistent with it being operated commercially for profit. The decision runs contrary to the ATO’s current interpretation set out in Taxation Ruling TR 2021/2.
The Commissioner’s appeal against the decision was heard by the Full Federal Court in November 2025, where judgment has been reserved. In its Interim Decision Impact Statement (QUD 702 of 2024), the ATO has stated that, until the appeal process is finalised, it does not intend to revise its guidance on car parking fringe benefits and the meaning of “commercial parking station” as set out in TR 2021/2 and Chapter 16 of Fringe benefits tax – a guide for employers. The ATO advises that taxpayers should continue to lodge their FBT returns in accordance with its existing guidance.
SEPL Pty Ltd
In FC of T v SEPL Pty Ltd ATF SFT Trust 2025 [2025] FCA 581, the taxpayer was the corporate trustee of a discretionary family trust. The taxpayer’s directors were 3 brothers who were also eligible beneficiaries under the relevant family trust. The directors managed the business and received employer superannuation contributions but there was no written contract of employment, and the directors were not paid salary and wages. Over 40 luxury vehicles were also purchased in the company name and made available for use by the 3 directors. Each director used the vehicle allocated to him for business and personal use during the relevant FBT years. The Commissioner assessed FBT on the private use of the 40 luxury vehicles which the taxpayer disputed. The key FBT issues in this case concerned whether the directors were employees for FBT purposes and whether the non-cash benefits, ie use of the luxury vehicles, were provided in respect of employment under the FBTAA.
At first instance the AAT found in favour of the taxpayer (BQKD v FC of T 2024 [2024] AATA 1796. On appeal the Federal Court (O’Sullivan J) overturned the AAT’s decision and held that the FBT law definition of employee is broad and does include directors even if they do not have a formal employment contract. The court found that the AAT erred in law in its approach of applying common law concepts of employment. Further, the court found that the exclusive use of the vehicles by the directors was in respect of their employment as the benefits arose by virtue of their roles as directors. The court distinguished J & G Knowles & Associates v FC of T 2000 [2000] FCA 196 which considered when a benefit is provided in respect of employment.
The taxpayer has appealed to the Full Federal Court against the decision, where a hearing is scheduled for 20 March 2026.
Compliance and what attracts the ATO’s attention
Compliance
The ATO notes that despite FBT turning 40 this year, it is still an obligation that is most overlooked by employers. Unlike the superannuation guarantee, PAYG withholding, or Single Touch Payroll, which are mandatory obligations, employers are not required to provide fringe benefits. There are other ways employers can reward their employees without attracting FBT, eg providing a cash bonus. However, where an employer chooses to provide fringe benefits, it is important that they understand how FBT works to ensure compliance.
Four key compliance steps
Step 1: Identify the type of fringe benefit provided.
Step 2: Determine the taxable value for each benefit.
Step 3: Keep accurate records to support any claims and calculations – even if the employer liability is nil.
Step 4: Lodge, Report and Pay. Employers need to lodge the FBT return, report reportable fringe benefits and pay any FBT liability by the due date.
Tip: Employers who are registered for FBT but have no liability for the FBT year should complete the Notice of non-lodgment - Fringe benefits tax form and send it to the ATO. This will avoid the ATO seeking an FBT return at a later date.
What attracts the ATO’s attention
Motor vehicles
- Private use. Claiming 100% business use without having sufficient evidence to support the claim.
- Logbooks. Not keeping logbooks, invalid logbooks and logbooks that are not representative of actual use, ie they do not include all the required information to be compliant. Logbooks must contain enough detail to clearly demonstrate the usage of the car during the logbook period. Employers must ensure that logbooks include the start and end date of the journey, the start and end odometer readings of the journey, kilometres travelled and reason for the journey.
- EV FBT exemption. Claiming the exemption for luxury cars that are over the luxury car tax limit.
Nil or non-lodgments
The ATO is focusing on nil returns and non-lodgments as part of its compliance program. The ATO is advising employers to determine whether benefits have been provided and the value of those benefits before lodging a nil return or sending the ATO a notice of non-lodgment.
Employee contributions
Employee contributions are one of the main ways employers can reduce their FBT liability for most fringe benefit categories. Employers must identify if they have provided a benefit and determine the value of the benefit, before applying employee contributions.
Employers must also avoid the mistake of reporting employee contributions at the wrong label. Employee contributions should be reported at income label 6I for companies, and in the business and professional items part of the schedule at label 46T for trusts. Reporting at the wrong label creates a mismatch in the ATO’s data and may result in the ATO contacting an employer to undertake a review or audit.
Inadequate record keeping
The ATO has highlighted the importance of keeping correct records to support their FBT calculations, exemptions or any concessions. Employers who fail to maintain proper documentation risk penalties and interest charges.
Further information
Useful information on FBT can be found on the ATO’s website at ato.gov.au/fbt.
Also see the Fringe benefits tax - a guide for employers which is the ATO’s most comprehensive guide to FBT.
If you missed the webinar, you may access the recording here.
