NTAA calls for targeted FBT reforms to reduce compliance burden

The National Tax & Accountants’ Association (NTAA) has urged the government to revise the fringe benefits tax regime to reduce the compliance burden for small businesses, strengthen the system’s integrity, and improve revenue outcomes.

In a submission to the Board of Taxation’s Red Tape Reduction Review, the NTAA identified four proposals focused on FBT grouping, car parking fringe benefits, car parking benefits and meal entertainment.

The NTAA said the absence of any grouping mechanism for FBT leads to inefficiencies and duplication within corporate groups, as each employing entity that provides firing benefits must separately lodge and pay FBT.

The association explained that preparing multiple FBT returns across a group results in unnecessary compliance costs.

“We have received long-standing anecdotal feedback that some large corporate groups informally centralise FBT reporting and payment through a single entity, typically the head company of a tax-consolidated group, to improve efficiency,” it said.

“While not permitted under current law or ATO administrative practice, this reflects a clear desire for a streamlined FBT reporting mechanism. In these cases, subsidiaries are generally still reporting FBT amounts correctly in their financial statements and income tax returns.“

Allowing entities to lodge and pay FBT on a grouped basis would reduce duplication, lower compliance costs, and streamline administration, the association said.

“The key challenge is designing FBT grouping rules that achieve these outcomes without creating additional complexity,“ it said.

The association suggested allowing employer entities to make an optional, revocable nomination to form an FBT group for an FBT year, with a nominated reporting entity being responsible for lodging and paying FBT on behalf of the group.

Key features of the nomination mechanism would include:

● Nomination by ABN, with aggregated FBT reported on a single return by the reporting entity.

● Lodgment of the nomination with the ATO to provide transparency and oversight.

● Continued reporting of FBT by individual employers in their financial statements and income tax returns.

● Written consent from each participating entity.

“This approach would provide a simple, flexible alternative to complex grouping tests based on control or ownership, avoid tracing rules, require no legislative change, and could be implemented as an administrative reform,“ said the NTAA.

“Further, nomination forms enable transparent tracing and enforcement by clearly recording employer consent to FBT group lodgment.“

The association also wants to see changes to car parking fringe benefits, given that it is currently one of the most complex areas of the FBT regime.

It noted that Chapter 16 of the ATO's Fringe Benefits Tax - a guide for employers outlines 16 steps to determine whether a car parking benefit has been provided on a particular day.

“Persistent uncertainty in interpreting and applying the car parking provisions after 40 years is both unsurprising and concerning,“ said the NTAA.

“In some cases, employers are unsure whether a car parking benefit has arisen at all. The recent decision in Commissioner of Taxation v Toowoomba Regional Council [2026] FCAFC 50, which reversed the Federal Court’s decision on appeal, highlights the complexities of these rules.“

This complexity leads to inefficiency, inadvertent errors and unintentional non-compliance, the association cautioned.

“Low understanding of the rules contributes to low compliance and directly impacts revenue,“ the NTAA said.

“Notably, FBT represents the largest tax gap measured by the ATO, with gross and net gaps exceeding 30 per cent in recent years on a revenue base of around $6 billion. NTAA considers two issues to be of particular concern.“

The NTAA proposed four reform options, including narrowing the definition of a commercial parking station to exclude parking at shopping centres, stadiums, hospitals, universities and regional airports, where pricing is designed to discourage all-day parking.

Another option, it said, could be to allow employers to establish a daily car parking rate in an ‘initial year’, which may then be indexed annually using an ATO-published factor.

Other options, it said, include limiting FBT to one benefit per car space per day or extending the small business car parking exemption in section 58GA so that it applies regardless of whether parking is provided on the employer’s premises or via payment at a commercial parking station.

The NTAA also outlined that the FBT treatment of meal entertainment was complex and poorly understood.

The association recommended that the ATO provide further administrative guidance on the minor benefits exemption under paragraph 58P(1).

“NTAA recommends retaining the $300 per-benefit threshold, but requests that the ATO provide administrative guidance on the total value of benefits that may be provided to an employee in an FBT year while still satisfying the requirements of subparagraph 58P(1)(f)(ii),“ the association said.