FBT case reminds businesses to clearly distinguish owner, employee roles

On 27 March, the Federal Court of Australia ruled that the provision of luxury vehicles for three directors of a trustee company was not a fringe benefit, overturning a previous decision on the matter.

In a recent insight, Grant Thornton employment tax specialists Elizabeth Lucas and Leanne Tomkinson said the case, SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026], had affirmed that benefits flowing to owners and beneficiaries were not automatically classed as fringe benefits, even if the individual was involved in the business’s operations.

Lucas and Tomkinson said the SEPL case served as a timely reminder that businesses needed to clearly distinguish between employment-related benefits and owner- or beneficiary-related benefits as they prepared their 2026 fringe benefit tax (FBT) returns.

“The Court confirmed that simply working full‑time in a family business does not, of itself, create an employment relationship for FBT purposes,” they wrote.

“The absence of employment contracts, salaries, and employment entitlements supported the conclusion that the brothers acted in an owner/controller capacity, not as employees.”

In response to the SEPL decision, Lucas and Tomkinson said that family businesses should ensure that owner and employee roles are clearly defined in documentation, given that the distinction between these roles was central to the case.

Despite the ruling, they added that the ATO would likely continue to scrutinise significant non-cash benefits if they appeared to be remuneration rather than beneficiary entitlements.

A key consideration in the SEPL case was Section 137 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), which the primary judge had treated as a mechanism that expanded the category of employee to include people who performed functions relevant to the company and received non-cash benefits.

"That was an error," Federal Court Justices Perry, O'Callaghan and Thawley said.

Lucas and Tomkinson said that the case had reiterated that a benefit would need to be sufficiently connected to an employment relationship to attract FBT liabilities, and that FBT remained focused on genuine employer-employee relationships.

“For family owned and owner managed businesses, this gives clarity that ownership based benefits are not automatically caught in the FBT net just because family members are actively involved in the business,” they noted.

However, Lucas and Tomkinson added that the ATO would continue to monitor significant non-cash benefits that could be viewed as remuneration.

“While SEPL provides greater certainty, significant non‑cash benefits may still attract ATO scrutiny if they seem like remuneration rather than ownership or beneficiary entitlements,” they noted.

“This is certainly something that we often see attracting ATO attention, in relation to vehicles in particular.”