As Fringe Benefits Tax (FBT) lodgement season approaches, family businesses should take the time to review the benefits provided to working directors and family members. A recent high-profile case involving luxury vehicles supplied to three brothers operating a large family business highlights both the complexity of these arrangements and the risks of getting them wrong. While the case initially suggested a broader FBT exposure, the Full Federal Court’s latest decision provides welcome clarification, confirming that not all benefits provided to working owners will automatically attract FBT.

What may appear to be informal “owner entitlements” or beneficiary perks can still draw scrutiny from the Australian Taxation Office (ATO). The courts have reinforced that the outcome depends heavily on the substance of the arrangement, the supporting documentation, and the capacity in which the benefit is provided.

Background
The case involved three brothers who operate an extensive business spanning petrol stations, convenience stores, fast food outlets, tobacco retailing, and gift shops. They act as shareholders, directors, and key decision-makers, and also hold powers under the trust deed. 

Despite working in senior executive roles, they did not receive formal salaries or wages. Instead, profits and benefits were distributed through a family discretionary trust, with a corporate trustee managing the structure.

The business provided the brothers with exclusive access to more than 40 luxury and high-performance vehicles, including Bentleys and Ferraris, for both business and private use. The cost of private use was allocated to a family member’s beneficiary account and ultimately settled through trust distributions which is consistent with a beneficiary entitlement rather than employment remuneration.

The ATO assessed FBT on the private use of these vehicles, arguing that the benefits were provided to the brothers as employees in respect of their employment.

What the Court Decided
The Administrative Appeals Tribunal (AAT) initially ruled in favour of the taxpayer, finding that the brothers were not employees for FBT purposes and that the benefits were not provided “in respect of” employment. Instead, the benefits were linked to their roles as beneficiaries and controllers of the family trust.

Although this decision was overturned at first instance in the Federal Court, the Full Federal Court ultimately restored the AAT’s position in March 2026.

Key conclusions included:

• Employee status: It was open to the AAT to conclude that the brothers were not employees under FBT law. The absence of employment contracts, wages, and traditional entitlements, along with their governance and ownership roles, supported this view. 
• Connection to employment: Even if they were treated as employees, the benefits were not sufficiently connected to employment. The vehicles were not a substitute for salary, but rather flowed from their positions within the family trust structure. 

Why This Matters
This case highlights the ATO’s continued focus on individuals who operate in dual capacities—such as directors who are also beneficiaries and active participants in a family business. At the same time, it provides important guidance:

• Not all benefits provided to working family members will trigger FBT. 
• The way benefits are structured, funded, and documented is critical. 
• Common law employment principles still play a key role in determining FBT outcomes. 
• Blended roles do not automatically result in FBT exposure where the dominant character is that of a beneficiary. 

That said, caution remains essential. The ATO is likely to continue reviewing similar arrangements, particularly where benefits resemble remuneration or lack clear supporting records.

Family businesses should act proactively to manage FBT risk:

• Document arrangements clearly: Ensure trustee resolutions and records support the intended treatment of benefits. 
• Assess FBT exposure properly: Apply the relevant valuation methods and consider employee contributions where appropriate. 
• Review available concessions: Certain exemptions, such as minor benefits or electric vehicle concessions, may reduce liability. 
• Check related issues: Consider whether Division 7A or deemed dividend risks may arise where benefits involve private companies. 
• Plan ahead: With increased ATO scrutiny, modelling and forward planning can help balance tax efficiency with commercial flexibility. 

Importantly, any unreported FBT liabilities may result in penalties and interest if identified by the ATO.

The SEPL decision ultimately favours taxpayers and confirms that FBT does not automatically apply to all benefits provided within family trust structures. However, each case depends on its specific facts and supporting evidence.

If your business provides vehicles, travel, or other benefits to family members involved in operations, particularly where no formal salary is paid, now is the time to review your arrangements. Talk to Bates Cosgrave team to ensure compliance while preserving flexibility and protecting business outcomes.