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Fringe Benefits Tax Audit Insurance

Understanding FBT Audits and Compliance Risks for Employers

Fringe Benefits Tax (FBT) is a separate tax payable by employers on certain benefits they provide to their employees or associates, such as company cars, low-interest loans, or entertainment expenses. Managed by the Australian Taxation Office (ATO), FBT is assessed annually and operates under a complex set of rules and exemptions. Because of the intricate calculations involved—especially around car fringe benefits, living-away-from-home allowances, and meal entertainment—errors or omissions can easily trigger an FBT audit.

The ATO frequently conducts FBT audits and reviews to ensure businesses are correctly assessing, reporting, and paying their FBT liabilities. Industries with high benefit volumes, inconsistent reporting, or businesses claiming FBT exemptions without proper substantiation are often targeted.

Responding to an FBT audit can be time-consuming and expensive, often involving deep reviews of payroll records, employee benefit logs, travel expenses, and salary packaging arrangements. Many businesses choose to protect themselves with tax audit insurance, covering the professional fees associated with managing an FBT audit. Below, we answer the most common questions about FBT audits and how audit insurance helps protect your business.

FAQs

Fringe Benefits Tax (FBT) is a tax paid by employers on certain non-cash benefits provided to employees or their associates. These benefits can include company vehicles, entertainment, accommodation, low-interest loans, and even gym memberships. FBT is separate from income tax and is calculated based on the taxable value of the benefits provided, with annual lodgement and payment requirements.
The ATO is intensifying its FBT compliance activities as businesses increasingly use non-cash perks to attract and retain talent. With data from Single Touch Payroll (STP), fuel cards, vehicle tracking tools, and corporate card systems, the ATO can now more easily identify discrepancies between reported benefits and actual usage. Employers who fail to correctly classify, document, or report fringe benefits are at higher risk of being audited and penalised.
Industries and businesses that offer regular perks or flexible benefits are more exposed, including:
  • Real estate and construction (vehicle use and travel allowances)
  • Consulting and legal firms (entertainment and meal benefits)
  • Logistics and transport (company vehicles and fuel cards)
  • Employers with salary packaging programs or high employee mobility
For example, a firm offering vehicles to multiple employees without maintaining proper logbooks could face a reassessment if use is deemed private but not properly taxed.
  • Missing or inaccurate logbooks for vehicle usage
  • Incorrect classification of benefits (e.g. failing to apply statutory formula method)
  • Claiming entertainment or travel as a business expense without including it in FBT reporting
  • Discrepancies between FBT lodgements and STP or PAYG summaries
  • Misuse of exemptions such as the “minor benefit” rule
If fringe benefits are misreported or undeclared, the ATO may issue retrospective assessments across several years. This can include:
  • Backdated FBT payable
  • Interest on unpaid liabilities
  • Administrative penalties
  • The need to correct employee payment summaries or tax positions

FBT audits often require accountants, payroll professionals, and legal advisers to review benefits provided over several years. Documents such as travel records, logbooks, and employee declarations must be collected and assessed.


AuditCover’s tax audit insurance covers:

  • Accountant and payroll consultant fees
  • Legal advice to interpret FBT legislation or exemptions
  • Assistance with preparing and amending returns
  • Representation in ATO discussions or reviews

This ensures you can engage the right experts without worrying about cost.

AuditCover offers comprehensive audit insurance tailored for modern employers. Our FBT cover includes:
  • Fast, digital policy setup
  • Nationwide coverage for all fringe benefit categories
  • Support for vehicle fleets, salary packaging, and multi-entity reporting
  • Tools for accountants to guide clients through FBT review season
If your business offers any non-salary perks, get a quote today. If you’re a tax adviser or accountant, join the AuditCover Partner Program to include FBT audit protection in your client services.

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This insurance is issued by Auditcover Australia Pty Ltd (ABN 63 638 872 634, AFSL 535509) on behalf of the insurer HDI Global Specialty SE (ABN 58 129 395 544, AFSL 458776).

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