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Your 2025-26 Fringe Benefits Tax (FBT) Preparation Checklist

As we approach the end of the 2025–26 Fringe Benefits Tax (FBT) year on 31 March 2026, now is the time for preparation and to take control of your obligations. FBT can become complex for some businesses, especially where vehicles, travel, entertainment, hybrid work arrangements and employee reimbursements, or a mix of these, are involved. For too many Australian business owners, FBT creeps up at the last minute, resulting in scrambling for logbooks, chasing employee declarations, correcting expense coding and relying heavily on spreadsheets. With the right preparation, you can reduce compliance risk, improve tax efficiency and avoid unnecessary stress. Here’s what you should be doing now for 2025-26 FBT year-end preparation, including a practical checklist you can start acting on immediately.

Understanding Your FBT Exposure

Fringe Benefits Tax applies to most non-cash benefits you provide to employees or their associates in place of salary or wages. If you employ staff, there’s a strong chance you have some level of FBT exposure. Common fringe benefits include:

• Motor vehicles (including novated leases)
• Expense reimbursements
• Corporate credit cards
• Meals, entertainment and staff functions
• Travel and accommodation
• Remote and hybrid work benefits
• Living-away-from-home allowances

The Australian Taxation Office (ATO) provides a detailed overview of benefit types on its website (click here).

Your first step should be to conduct an internal review of all benefits provided during the year. Map them across departments and cost centres, and assign clear ownership between Finance, Payroll and HR. Businesses with centralised expense data and visibility across systems are far better positioned to identify FBT exposure early — rather than discovering issues in late March.

Common Fringe Benefits You Should Review Closely

Certain benefit categories consistently create risk for business owners.

Motor Vehicle Fringe Benefits: If a car is made available for private use, including commuting between home and work, an FBT liability may arise. This includes company cars and vehicles under novated lease arrangements. You must ensure logbooks, odometer records and usage calculations are accurate and up to date, as incomplete documentation is one of the most common compliance gaps we see.

Meal Entertainment Fringe Benefits: Food and drink provided to employees can trigger FBT. Examples include staff Christmas parties, work functions, client lunches, and corporate hospitality such as box seats at the footy. It is important to correctly distinguish between employee entertainment and client entertainment and apply the appropriate valuation method.

Expense Payment Fringe Benefits: Reimbursing employees for private expenses such as private travel, school fees or health insurance, may attract FBT. Even corporate card transactions can fall into this category if not coded correctly.

Accurate coding and documentation are essential to avoid misclassification.

Exemptions and Concessions That May Reduce Your FBT

While understanding taxable benefits is critical, being aware of exemptions and concessions can create opportunities to provide staff benefits in a tax-effective way. The ATO outlines available exemptions and concessions (click here). Key examples include:

Electric Vehicles (EVs): Certain electric vehicles valued below the luxury car tax threshold may be exempt from FBT. While record-keeping requirements still apply, the exemption can significantly reduce tax exposure.

Work-Related Devices: Laptops, tablets, mobile phones and other work-related devices are generally exempt where primarily used for work purposes.

Minor Benefits: Benefits valued under $300 that are provided infrequently and irregularly may qualify for the minor benefits exemption. Examples include small gifts, occasional staff meals or modest celebration events.

Retraining and Reskilling: Training provided to employees to support reskilling or career transition may qualify for exemption. Understanding these concessions can help you structure employee benefits more strategically while remaining compliant.

Review Data Quality and Documentation

The ATO requires accurate and well-documented records. Weak documentation is one of the biggest risk areas in FBT audits. Common issues include:

• Missing employee declarations
• Incomplete or outdated vehicle logbooks
• Entertainment incorrectly coded
• Private expenses misclassified as business
• No substantiation for “otherwise deductible” claims

Now is the time to review your data quality. This can include an audit of a sample of high-risk transactions, confirming your documentation retention policies are up to date, and validating that employee declarations have been collected where required. Real-time visibility and correct preparation of expense data can dramatically reduce FBT year-end headaches.

Align Finance, Payroll and Tax Early

FBT reporting often suffers from siloed processes, where your finance function calculates taxable values. Payroll handles gross-up treatment, and tax advisers review compliance. If these teams are not aligned early, errors can occur. Before 31 March 2026, you should:

• Confirm your taxable value calculation methodology
• Validate payroll gross-up treatment
• Confirm how Reportable Fringe Benefits Amounts (RFBA) will be managed
• Reconcile expense systems with your general ledger

Your Pre–31 March 2026 FBT Checklist

By the end of February 2026, your business should have:

✔  Completed an interim FBT exposure review
✔  Identified high-risk transactions
✔  Collected outstanding employee declarations
✔  Validated vehicle logbooks and odometer records
✔  Reviewed expense coding accuracy
✔  Confirmed reconciliation between Payroll and Finance systems
✔  Considered applicable exemptions and concessions
✔  Agreed on external adviser engagement (if required)

Early preparation reduces penalties, audit exposure and reputational risk. It also gives you time to correct errors before they become costly.

Don’t Leave FBT to the Last Minute

FBT compliance in Australia is increasingly data-driven. Many businesses struggle with visibility and accuracy at reporting time, particularly where manual processes and spreadsheets are involved. With the 2025–26 FBT year ending on 31 March 2026, proactive preparation is your best defence. A structured review now can protect your business, improve tax outcomes and give you confidence heading into lodgement.

Your FBT return must generally be lodged and paid by 21 May (or 25 June if lodged through a registered tax agent). But waiting until April to start reviewing your data is often too late.

Need Help with Your 2025–26 FBT Preparation?

If you would like support reviewing your FBT exposure, strengthening your documentation processes or identifying available exemptions, the Business Services team at McKinley Plowman can help. Speak with our team on (08) 9301 2200, or visit our website at https://www.mckinleyplowman.com.au/contact-us/ to see how we can assist your business’ FBT compliance and optimisation. Early action now can save time, money and stress later.

written by:

Alex Tonon

Alex joined McKinley Plowman in mid-2020 as a Business Services Manager, building on her Bachelor of Commerce degree and CA qualification, as well as over fourteen years' experience in accounting and tax. Alex enjoys working alongside clients to start up and grow their businesses, looking after them all the way from business plans and structure formations, through to growing businesses and maximising value. Her clients appreciate her ability to assist them in understanding their numbers and developing a clear picture of what their business means to them.