Understanding Fringe Benefits in Small Businesses: Tricks, Traps & Structuring Smartly

By Jaye Mankelow



The ATO has identified FBT non-lodgement as a key compliance focus for the 2024–25 financial year, particularly among privately owned businesses and groups. This forms part of a broader effort to identify discrepancies between employer-provided benefits and what is reported.

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ATO Compliance Focus: 2024–25

The Fringe Benefits Tax (FBT) year ended on 31 March 2025, and it’s now time to determine whether your business has an FBT lodgement obligation.

With this renewed compliance focus, now is an ideal time to refresh your understanding of your business’s FBT obligations and ensure your reporting is up to date.

Do You Need to Lodge an FBT Return?

If your business provided any non-cash benefits to employees or their associates between 1 April 2024 and 31 March 2025, you may be required to lodge an FBT return — even if you’ve not done so in prior years.

Your business may need to lodge an FBT return if you provided:

• Company vehicles available for private use (including home-to-work travel)
• Entertainment benefits, such as meals, tickets, or staff functions
• Housing or living-away-from-home allowances
• Expense reimbursements for private items (e.g. phones, internet, subscriptions)
• Employee gifts or rewards that exceed the minor benefit exemption
• Car parking provided near the workplace
• Travel that mixes private and business purposes
• Electric vehicles (EVs) — even if potentially exempt, they may still require reporting

Many businesses inadvertently fall into FBT territory — particularly when providing vehicles or reimbursing expenses.

How Aspira Uses Employee Contributions to Offset your businesses FBT Liability

At Aspira, we work closely with clients to manage employee contributions for any private use of business assets — particularly vehicles — helping ensure FBT exposure is minimised and obligations are met. Where appropriate, we:

• Calculate the taxable value of the benefit
• Apply an employee private use contribution via journal entry, payroll deduction, or reimbursement

These contributions can fully offset the fringe benefit, often resulting in no FBT liability.

This process involves:

• Quantifying the benefit using statutory or operating cost methods (Log book)
• Reducing the benefit to nil for FBT purposes

Where there is no FBT Liability due to the private use contribution above, an FBT Return is not required to be lodged.

Is There a Reason to Now Lodge a Return?

Yes — It Still Protects Your Business

• ✅ Even if no FBT is payable, lodging a return is recommended to limit audit risk
• ⚠️ But here’s the catch:
  • If you don’t lodge, the ATO can audit indefinitely
  • With enhanced access to STP, vehicle registrations, and data-matching, the audit risk is real
• ✅ Lodging a return — even a nil return — limits the ATO’s review window to three years, offering greater peace of mind given the ATO's recent compliance focus.

What Happens If You Lodge vs. Don’t Lodge

This is especially important where vehicle use is offset via journal entries. The ATO may scrutinise records to ensure calculations and documentation are sound.

Equally, the ATO’s focus is likely to broaden beyond benefits that have been offset, to include any potential fringe benefits that may have gone unreported and overlooked.

Looking Ahead: Prepare Now for the 2025–26 FBT Year

With the 2024–25 FBT year now closed, it’s time to start preparing for the 2025–26 FBT year, ending 31 March 2026.

Recommended Steps:

• 📸 Take odometer photos for all business vehicles on 31 March and 1 April 2025
• 📁 Retain detailed records of any employee reimbursements, travel, entertainment, and asset use
• 📝 Document any private use of business assets, including vehicles, phones, or equipment
• 💰 Where employee contributions are used to offset private use, ensure they are recorded accurately
• ✅ Review policies to ensure consistency with ATO expectation

Proactive record-keeping now will reduce stress and risk next FBT season!

Logbooks: Best Practice and Compliance Essentials

Where the operating cost method is used to calculate car fringe benefits, maintaining a compliant logbook is critical. The ATO may disallow vehicle-related deductions or apply penalties where logbooks are missing, outdated, or inaccurate.

Key Logbook Requirements:

• 📅 12-week minimum: Must cover a continuous 12-week representative period
• 🔁 Valid for 5 years, unless there’s a substantial change in business use
• ✍️ Must include:
  • Date and journey description
  • Odometer readings (start and finish)
  • Purpose of the trip (business vs. private)
  • Total kilometres travelled
• 📲 Digital logbooks (via apps) are acceptable and recommended for ease and accuracy
• 🧾 Keep all supporting records (fuel, registration, insurance, repairs) for the same period

A well-maintained logbook not only supports accurate FBT reporting but also demonstrates due diligence in the event of an ATO review.

Tip for Xero/Myob/Qbks Users:

For businesses managing multiple vehicles, it's best practice to set up separate accounts in Xero for each vehicle. Categorising expenses by registration number helps clearly track running costs (e.g. fuel, servicing, insurance) and simplifies FBT calculations. This structure also supports accurate reporting under the operating cost method, particularly when logbooks are in use.

Final Call: Ensure Compliance, Avoid Unnecessary Risk

🗓️ FBT returns are due by 21 May 2025

What you need to know:

• If we regularly prepare and lodge your FBT returns:
  We’ll be in touch over the next couple of weeks to begin the process.
• If you haven’t previously lodged an FBT return but think you may have provided benefits:
  Please get in touch — we’ll assess your position and assist if required.
• If your business provides private use of assets (e.g. vehicles) and Aspira has been offsetting via employee contributions:
  We strongly recommend preparing and lodging a return this year to limit the ATO’s review period and confirm any additional fringe benefits.
• For businesses choosing to lodge and include employee contributions, there will be an additional service and a small fee to register for FBT and prepare the return.
• If you’re new to business or expect to lodge next year (2025–26):
  Now is the time to begin maintaining necessary records — including odometer readings, travel logs, and expense documentation.

For businesses choosing to lodge and include employee contributions, there will be an additional service engagement to register for FBT and prepare the return. For more complex cases, your manager will work through the types of benefits and documentation involved and provide an estimate for completing the return.

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