The Australian Taxation Office (ATO) has announced a major audit campaign targeting fringe benefits tax (FBT) on cars for the 2025 FBT year. On 26 August 2024, the ATO confirmed that its data-matching program for cars and FBT will be extended, signalling increased scrutiny for businesses providing vehicles to employees. This crackdown is expected to focus on common FBT pitfalls that could lead to significant tax liabilities for employers.
Understanding Fringe Benefits Tax (FBT) on Cars
Fringe Benefits Tax (FBT) is a tax employers must pay on certain benefits they provide to employees, including the private use of company cars. A car fringe benefit occurs when a vehicle owned or leased by an employer is available for private use by an employee. This includes vehicles taken home overnight or used for personal trips outside of business hours.
Employers must ensure they correctly calculate and report FBT to avoid penalties. The two primary methods for calculating FBT on cars are:
- The statutory formula method – A simpler approach that applies a fixed percentage to the car’s base value.
- The logbook method – Requires detailed records of business and private use to determine the taxable portion.
Key Areas of ATO Scrutiny in 2025 FBT Year
The ATO’s renewed focus on car-related FBT compliance highlights several risk areas, including:
- Fleet Cars & Shared Vehicles: Employers providing multiple employees access to the same car must accurately track usage and FBT implications.
- Workhorse Vehicles & Exemptions: Some employers assume workhorse vehicles (e.g., utes and vans) are automatically exempt. However, the ATO warns that private use beyond minor, infrequent, and irregular travel can trigger FBT liabilities.
- Company Cars Stored at Work: If a vehicle is stored at the workplace, it may still be considered available for private use, depending on accessibility and employee agreements. This is particularly a problem for the vehicles driven by business owners.
- Logbook Compliance: Inaccurate or incomplete logbooks can lead to unexpected FBT assessments. The ATO is particularly focused on verifying logbook claims for business use percentages.
- Hybrid & Electric Vehicles: The ATO’s latest guidance suggests that employers should carefully review FBT obligations when providing hybrid vehicles.
What Employers Should Do
To prepare for the ATO’s crackdown, businesses should:
- Review FBT reporting and ensure compliance with ATO guidelines.
- Maintain accurate logbooks and records of business vs. private vehicle use.
- Seek professional advice on FBT exemptions and calculation methods.
- Update employee policies on vehicle use to minimize tax risks.
With the ATO intensifying audits on car-related FBT, employers must stay vigilant and proactive in managing compliance. A thorough review of vehicle policies, documentation, and tax calculations can help businesses avoid costly penalties and ensure they meet their obligations.
Stay ahead of the ATO’s FBT audit—contact us today for expert guidance and ensure compliance!
