The FBT blind spots accounting firms can no longer ignore in 2026

FBT has always been a part of the Australian tax landscape. Most accounting firms are aware of its existence, and while many clients have heard of it, in practice, it often sits just outside of the main focus of the work.

For most, it gets picked up once a year, sometimes briefly, sometimes not at all. However, this approach has historically not created too many issues. But that situation is changing rapidly.

What I am currently observing is a marked increase in the attention being placed on areas that were once overlooked. These areas are not unusual; they exist within the realm of everyday business activities. Consider company vehicles, dual-cab utes, and entertainment expenses—these are the kinds of transactions that clients typically engage with regularly. This familiarity is exactly why they are now being scrutinised more closely than ever before.

Why FBT is Coming into Focus

FBT has been embedded within the Australian taxation system for decades. Yet historically, it has not received the same level of attention as income tax or GST. This trend is shifting dramatically.

The Australian Taxation Office (ATO) is now focusing more closely on the gap between what should be collected in FBT and what is actually collected. From the ATO's perspective, this gap is substantial enough to warrant a more targeted approach, especially among small and medium-sized enterprises (SMEs).

When we delve into the statistics, the rationale becomes clearer. There are approximately one million employing entities in Australia, but only a small fraction of these are registered for FBT. This disparity indicates to the ATO that there are numerous businesses that may not be fulfilling their FBT obligations. Once an issue becomes a focal point, it tends to maintain that focus, leading to more rigorous enforcement and compliance checks.

The Visibility Has Changed

Another significant shift in the landscape is the extent of visibility that the ATO now possesses. It is no longer just about what’s reported in a return; data can be aggregated across multiple sources to construct a clearer picture of what is genuinely occurring within a business.

This increased visibility includes various data points, such as:

• Vehicle registrations and insurance

• Toll and travel data

• Payroll reporting through Single Touch Payroll (STP)

• Information from finance providers

Even publicly available information can contribute to this enhanced visibility. For instance, social media posts showcasing events, client entertainment, or vehicle usage can add valuable context to potential FBT obligations.

The end result is straightforward: there is far less that goes unnoticed by the ATO.

Where Issues Tend to Show Up

When compliance reviews are conducted, specific areas tend to emerge repeatedly as sources of concern. Vehicles, for instance, represent one of the most significant areas of scrutiny. When a vehicle is owned or leased by a business and made available for private use, it can create an FBT liability. The challenge often lies in the documentation. Without comprehensive records, it becomes difficult to substantiate how the vehicle is being utilised.

This lack of clear documentation is where I frequently observe issues beginning to manifest. For example, if a business cannot provide adequate records detailing the extent of private usage versus business use of a vehicle, it opens the door for potential disputes with the ATO during audits.

The Ute Misconception I Keep Seeing

One of the most prevalent misconceptions I encounter relates to dual-cab utes. There exists a common belief that these vehicles are automatically exempt from FBT liability, but this is not the case. While exemptions can apply under specific circumstances, they are contingent on how the vehicle is utilised and whether certain conditions are satisfied.

Usage patterns significantly influence the applicability of exemptions. For instance, if a dual-cab ute is primarily used for work-related purposes but is also available for personal use, the owner must maintain clear documentation to support this claim. When documentation is lacking or unclear, the FBT position can change quickly, leading to unexpected liabilities.

This misconception is one of the main reasons why dual-cab utes continue to surface as a focal point during compliance reviews. The assumption appears straightforward, yet the reality is often much more complex.

Entertainment is Another Grey Area

Entertainment expenses present another ambiguous area when it comes to FBT. Expenses such as client functions, tickets, travel, or accommodation are frequently recorded as standard business costs. However, the treatment of these expenses is highly context-dependent.

Key factors include:

• Who attended the event

• The reason for incurring the expense

• Whether the expense was provided in the context of employment

If this context is not accurately captured, it becomes challenging to determine the appropriate FBT treatment later on. Consequently, issues tend to arise in these situations, highlighting the need for meticulous record-keeping and clarity in expense reporting.

What Happens When Something is Missed

When an issue is identified during a compliance review, it rarely remains isolated. The repercussions can extend back several years, which allows time for liabilities to accumulate. Once penalties and interest are applied, the total amounts can escalate rapidly.

The impact of missed FBT obligations does not stop at FBT itself. It can ripple into other areas, such as employee reporting, payroll tax, or insurance calculations. In some instances, it leads to difficult conversations with employees when information needs to be amended retroactively. This situation illustrates that the ramifications are not merely technical; they can have significant operational consequences as well.

Why This Still Gets Left Too Late

Even with the increasing scrutiny and visibility surrounding FBT, many accounting firms continue to treat it as an issue to be addressed only when it arises. Part of this stems from the inherent complexity of the rules. The regulations are detailed and, compared to other areas of taxation, can feel less familiar to many practitioners.

Additionally, practical challenges arise. Many clients do not maintain the necessary records, and once the time comes to gather that information retroactively, it can become a laborious process. This often leads to FBT matters being deprioritised.

Over time, this creates a pattern where FBT is only addressed reactively, leading to potential compliance issues and increased liabilities down the line.

What I’d Suggest Doing Instead

The necessary shift in approach is not about transforming FBT compliance into a major project for every client. Instead, it focuses on being more intentional about identifying where the risks reside and addressing them proactively.

Practically, this usually begins with a series of straightforward checks:

• Identifying clients who may need to be registered for FBT

• Examining vehicles held within the business

• Understanding how entertainment expenses are recorded

• Encouraging improved record-keeping practices concerning usage

• Clarifying how exemptions apply in real-world scenarios

These steps are not overly complex, yet they can have a significant impact when executed consistently. By fostering a culture of awareness and diligence regarding FBT, firms can mitigate risks and improve compliance.

Where This is Heading

FBT has long occupied a background position within the Australian taxation framework. However, this position is evolving as visibility increases and the ATO intensifies its focus on compliance. For firms working with SMEs, this shift alters how FBT integrates into the broader financial picture of their clients.

FBT must now be viewed as a daily operational concern rather than a simple year-end compliance task. The initial step for firms is to recognise where the potential exposures lie and address them early, rather than waiting for issues to surface later.

Watch the Full Session

If you are interested in gaining a more detailed perspective on this topic, I delve into it step by step in my QuickFest session. You can catch the full replay here:

Watch the QuickFest 2026 Replay