Vehicle FBT Compliance: ATO's Crackdown on Private Use

This year, the ATO will be using third-party information to identify employers who have been providing fringe benefits and are operating outside the FBT system. One of the ATO’s biggest target areas will be car fringe benefits. As a result, the ATO have extended the Motor Vehicle registries data-matching program to determine what vehicles are owned by an employer that may be available for private use.

Due to the ATO’s increased audit focus on car fringe benefits, the ATO has indicated that there are a few areas of concern that commonly result in FBT audit adjustments with respect to car-related benefits. These include:

• Incorrect classifications of whether a vehicle constitutes a ‘car’ for FBT purposes, particularly where the car has been modified.
• Inappropriately applying exemptions.
• Inadequate documentation such as deficient logbooks or incorrect vehicle base value calculations (for FBT purposes).

For this reason, it is strongly recommended that you prepare an FBT Return for the 2025 FBT year (including employee declarations) even if it has NIL FBT payable. This restricts the ATO to a 3-year FBT audit period – otherwise the ATO can go back an unlimited number of years to audit your business for FBT.

With the ATO taking a more aggressive stance on FBT compliance, now is also the time to review your business’s policies and practices around vehicle fringe benefits. Ensuring that you comply with the FBT rules can save your business from costly penalties, audits, and reputational damage. Regularly reviewing vehicle use, documenting business vs private usage, and ensuring that all necessary forms and declarations are in place will help safeguard your business from the ATO’s growing scrutiny.