A FBT round up

There has been a bit going on in the FBT space of late.

So, as it is FBT return time, we thought we would take a look at few recent developments including:

• Car parking post the Toowoomba Regional Council case;
• EVs and the future for the FBT exemption;
• learnings from some recent FBT & car cases; and
• the proposed tightening of the section 58 eligible work related items exemption.

Cark parking – a final position?

After a long wait and just in time to lodge 2026 FBT return we have our answer in the Toowoomba Regional Council (‘Toowoomba’) car parking FBT case.

The ATO was successful in a Full Federal Court appeal that a car parking facility operated at the Grand Central Toowoomba Shopping Centre (‘Grand Central’) was a commercial car parking station. As a result, employers providing parking to employees within a 1km radius of Grand Central need to consider it when determining whether car parking fringe benefits exist. The decision may be viewed here.

The case gives strength to the ATO view in TR 2021/2 as to when a car parking facility is a commercial parking station for FBT purposes. The ATO position focuses heavily on physical features such as advertising, entry/exit controls, payment mechanisms etc. We have re-produced the ATO position at the end of this article.

For most small businesses, FBT on car parking provided to employees is generally a non-issue due to the small business car parking exemption in section 58GA of the Fringe Benefits Tax Assessment Act 1986 (the FBT Act).

For other employers though, the Toowoomba decision may represent a significant additional FBT cost.

The Toowoomba decision primarily wrestled with the significance of the word ‘commercial’ when identifying what is a commercial car parking station. The decision considered the intent of Parliament as reflected in the relevant Explanatory Memorandum accompanying the introduction of the car parking provisions. In doing this the decision explored the different consequences if ‘commercial’ was given a meaning as intending to make a profit (from the operation of the car parking) in contrast to a broader test of the car park being used in/deployed in commerce.

The joint judgement (McElwaine and Fuetrill) concluded the latter interpretation was preferred noting it prevented problems posed by the alternate interpretation which required a taxpayer to ‘know’ if a parking facility was operated to make a profit/did make a profit etc. The judgement also took the view that Parliament intended a wide meaning be applied with problematic scenario’s able to be removed by passing of a Regulation. To date Regulations have only been made to exclude certain parking facilities used by persons with disabilities.

The source of the historic exclusion for car parks that did not have a primary purpose of all day parking (based on rates charged etc) was found in TR 96/26 (now withdrawn). TR 2021/2 did not retain the concession previously reflected in TR 96/26 (with the change in position taking effect from 1 April 2022).

Whilst the judgement is quite reasonable/understandable it unfortunately means car parks, where the primary purpose is not to provide all day parking or that only provided limited all day parking must be considered by an employer when determining their car parking FBT liability.

These types of car parks will often dissuade commuters/residents of apartments etc utilising spaces by charging high all-day rates which will often exceed the car parking threshold (this causing the problem).

Action?

Taxpayers completing 2026 FBT returns should now logically proceed based on the ATO view in TR 2021/2 . Where an approach contrary to TR 2021/2 has been taken in previous years, amendment of FBT returns appears the appropriate course of action.

As to whether there is an appeal we will have to wait and see but some clarity and finality on this issue is long overdue.

Electric Vehicles – the roadmap

By a joint media release dated 5 May 2026, the Treasurer, Jim Chalmers MP and Minister for Climate Change and Energy, Chris Bowen MP outlined the Government’s plan to continue but scale back the electric car FBT exemption (or the “discount” as it gets called) . The broad plan is summarised below (based on the media release):

General

• existing leases won’t be impacted

Until 1 April 2027

• no changes until end of March 2027

Between 1 April 2027 and 1 April 2029

• the full FBT discount will continue to apply only for EVs costing $75,000 or less
• EVs costing more than $75,000 but below the luxury car tax threshold will receive a 25 per cent discount on their payable FBT

From 1 April 2029 onwards

• all EVs below the luxury car tax threshold will receive the 25 per cent discount on payable FBT

Summary

It is great to see some clarity around a longer term view for the EV FBT exemption. This should allow employers and employees to plan how and whether to use EVs with some certainty around the FBT position.

Whilst the reduction in the exemption may dampen demand from a tax cost perspective, at least the playing field is understood, subject of course to how the implementation occurs as detailed in enacting legislation.

ATO now focusing on car benefits?

In the ATO’s “What attracts our attention’’ webpage it perennially targets FBT issues with the provision of motor vehicles.

One of the significant contributors to the FBT gap is private use of vehicles where no FBT is paid. There is no doubt that overuse of the “workhorse vehicle” exemption is a significant contributor to the FBT gap.

Anecdotal evidence would suggest that ATO is getting active in the area, with taxpayers more regularly seeking assistance having received ATO ‘please explain’ type letters. Presumably the increase in ATO queries may be originating from various ATO vehicle data matching projects conducted in recent years.

Two recent cases highlight some of the issues at play.

Business assets used by directors – provided to an employee in respect of employment?

Initially we re-visit the ultimate outcome of a case we covered in The Assessment back in July 2024 , BQKD and Commissioner of Taxation (Taxation) [2024] AATA 1796 (10 May 2024) 

The original matter considered the question of whether three directors (brothers) of a trustee company of a discretionary family trust were employees for FBT purposes and, if so, whether the use of vehicles owned by the trustee company were benefits provided in respect of their employment.

The decision found for the taxpayer, on the grounds that, despite being directors, the brothers were not taken to be employees and, even if they were employees, any benefit arising from the use of vehicles was not provided in respect of their employment.

The original decision was overturned on appeal but a subsequent appeal (SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36 ) has seen the original decision restored.

So, what are the takeaways?

A core principle of the FBT system is that a benefit must be provided to an employee in respect of employment.

This requirement is generally easily determined however when benefits are provided to persons who are owners, whether the benefit is provided in respect of employment can be less clear cut as demonstrated in this case.

The outcome will be determined by many factors.

• Merley being a director or working in the business is not fatal.
• The nexus between the benefit and the employment must be established.
• Is the person employed? How are they remunerated? What is documented that may shed light on the matter? What is the position in relation to matters like leave entitlements? Has a consistent position been taken over time?
• On what basis can a person use business assets if not as a director/employee – for example, in this case the trust deed permitted use by beneficiaries.
• How are costs of the ’benefits’ recorded for accounting and tax purposes? Are costs charged to beneficiary loan accounts?
• And if there is business use (for example a car used by the director in business activities of the trust), how is that portion of the cost treated in the accounts, tax returns etc?

And so… the take-aways are?

The ducks need to line up if a no FBT outcome is to be taken/defended.

A Ferrari California is not a car?

Subsection 8(2) of the FBT Act provides that taxis, panel vans and utility trucks designed to carry a load of less than 1 tonne; or any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers), are FBT exempt provided that there is no private use of the car other than:

• work-related travel of the employee — i.e. travel between home and work, or travel that is incidental to travel undertaken in the course of work; or

• minor, infrequent or irregular private use travel.

To assist identifying vehicles that aren’t designed to principally carry passengers, a formula in Miscellaneous Taxation Ruling MT 2024 may be applied. The formula compares seating capacity by passenger weight (68kgs) to total load carrying capacity to determine principal purpose, (i.e. load or passenger carrying).

Subsection 8(2) was put to the test recently in the case of MXSN and FCT (Taxation) [2026] ARTA 186, a taxation decision of the Administrative Review Tribunal ‘(ART’).

Facts

• The company (MXSN) provided a luxury sports car — a 2010 Ferrari California — to its sole director.
• The vehicle was acquired under a 100% financed hire-purchase agreement.
• The director had full private use of the vehicle and garaged the vehicle at home.
• Evidence was obtained from a highly regarded US-based expert that the vehicle was a “highly exclusive sports car that is born to race”.

Issue

• Whether the Ferrari could be treated as exempt from FBT on the basis that it was a “commercial vehicle” or a vehicle “not designed to carry passengers”.

Tribunal’s Decision

• The ART held that the company was liable for FBT on the provision of the Ferrari to the director.
• It found that on its proper construction, the exemption “only applies to commercial vehicles”, and the Ferrari was not a commercial vehicle.
• It stated that while the Ferrari may be considered a sports car, it was designed for the purpose of carrying passengers.
• The ART found the director’s logbooks were “complete fabrications” and placed no weight on them.
• It was not satisfied that any private use (including trips by the director and his girlfriend to Margaret River) was “minor, infrequent and irregular”.

The decision is of no surprise.

The ART’s reasoning underscores the fact that the ordinary design and use of a vehicle — and the statutory definitions in FBT Act — are decisive of whether a vehicle is exempt.

A key takeaway though is that even if a vehicle is of a design that qualifies for exemption, the “minor, infrequent and irregular” private use requirement must still be satisfied. Weekend getaways, in this case to Margaret River, prevented any chance of the minor, infrequent or irregular private use requirement being satisfied.

Employees with private use of employer provided eligible dual cab style vehicles which are regularly used for weekend getaways and other leisure pursuits are reminded that the subsection 8(2) exemption is determined by both the type of vehicle AND use there-of.

Proposed amendments to the eligible work related items FBT exemption

Section 58X of the FBT Act provides exemption for eligible work related items provided to employees primarily for use in their employment duties. Section 58X, in practice provides, FBT exemption for items like laptops and mobile phones. The provision of the benefit can be by way of an expense payment fringe benefit (e.g. employer reimburses cost) or a property fringe benefit (employers buys and gives item to employees) or residual benefit (employers permits use of item). Whilst there are some restrictions in section 58X, there is nothing to prevent a benefit being provided under a salary packaging arrangement.

Whether an eligible work related item provided as an expense payment or property benefit is exempt under section 58X is tested when the benefit is provided based on why it is provided.

Ongoing use of the item once the benefit has been provided does not determine/alter the FBT treatment nor does private use prevent full exemption.

As a result, use of section 58X in salary sacrifice scenarios has been an increasingly attractive benefit given more and more items are being developed that potentially fit with the definition of a portable electronic device which is one of the sub-categories of eligible work related items. For example, the following items have been accepted by the ATO (ATO references provided) as eligible work related items:

• electronic watch – EPA 1052327672245
• virtual reality headsets – EPA 1052335939701
• portable GPS navigation receiver – ATO ID 2008/133
• portable phone headsets/ear buds – EPA 1051232412171

Despite employers perhaps not wanting to “fund” such products, the nexus to better performance of an employee’s employment duties justifies employers permitting access via salary packaging arrangements.

Included in the Instant tax deduction – exposure draft  released on 20 April 2026 April (re the $1,000 instant tax deduction) is a proposed amendment that will prevent section 58X exemption where a benefit is provided under a salary packaging agreement.

The change (if legislated) is intended to take effect from 1 April 2027.

Other changes will also be made to the FBT Act as part of the $1,000 instant tax deduction measure aimed at ensuring no double dipping occurs (e.g. a tax deduction claimed and no FBT payable under otherwise deductible expense payment fringe benefit rules).

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