FBT lodgement season has a way of bringing uncomfortable questions to the surface.
For family businesses, one of the most pressing right now is this: are the perks you provide to working directors and family members actually fringe benefits, and should you have been paying Fringe Benefits Tax on them all along?
A recent Full Federal Court decision has brought some welcome clarity to this question, but the case also serves as a timely reminder of just how much documentation and structure matter when it comes to family business arrangements.
The Case That's Put Family Business on Notice
In SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36, the Full Federal Court handed down its decision on 27 March 2026, ruling in favour of SEPL and confirming that no FBT was payable.
The case involved three brothers running a large family business group spanning petrol stations, convenience stores, and related operations, holding executive roles and working around 60 hours a week. They received no formal cash salary. Profits flowed through family trusts. More than 40 luxury vehicles, including Bentleys and Ferraris, were used for both business and personal purposes.
The ATO assessed FBT on the personal use of those vehicles. The matter went through three rounds of litigation, from the Administrative Appeals Tribunal (AAT), to a single Federal Court judge, and finally to the Full Federal Court.
The Full Federal Court restored the AAT's original decision. The brothers were not employees for FBT purposes. The vehicles were not fringe benefits.
Why the Court Ruled the Way It Did
The Full Court found several errors in the single judge's earlier approach and overturned that decision. Here is what the Full Court said and why it matters.
"Employee" has a specific meaning - and it doesn't always include working owners.
Just because someone works in a business does not automatically make them an employee for FBT purposes. The brothers were running the business as owners and beneficiaries, not as hired staff, and the Full Court confirmed that distinction matters.
The deeming rule cannot be used as a catch-all.
The rule that converts non-cash benefits into deemed wages has three conditions that must all be independently satisfied. In this case, the key condition was not met because any cash payment would have been made to the brothers as owners, not as employees.
There needs to be a real connection between the benefit and the employment.
For FBT to apply, the benefit must be meaningfully linked to someone's role as an employee. Here, the brothers accessed the vehicles through their ownership and beneficial interest in the trust, not their executive roles.
A benefit can have more than one explanation.
The presence of an employment relationship does not mean every benefit received is a fringe benefit. Where a stronger explanation lies in ownership or trust entitlement, the Full Court confirmed that explanation should be taken into account.
What This Still Means for Your Family Business
The Full Federal Court's decision is a positive outcome for family businesses, but it does not mean these arrangements are without risk.
The case went through three rounds of litigation and turned on very specific facts, documentation, and characterisation. The outcome could easily have been different with different circumstances.
A few things the case makes clear:
Blending roles without clear separation creates risk. When someone is simultaneously a director, a trust beneficiary, and a key worker in the business, the lines blur quickly. Without deliberate documentation, the ATO may draw its own conclusions about which role is actually being served by any given benefit.
Documentation is everything. The absence of board resolutions recording vehicle access as trust distributions created the ambiguity that drove three rounds of litigation. In this case, the overall structure ultimately supported SEPL's position, but that will not always be the outcome. Clear and consistent documentation of the basis on which benefits are provided reduces exposure significantly.
Working in the business without a cash salary raises questions. When someone is performing a senior role but receiving no formal remuneration, non-cash benefits attract scrutiny. The answer may ultimately be that FBT does not apply, but you need the structure and records to support that position.
Division 7A may also be relevant. Where benefits flow through a private company rather than a trust, it is necessary to consider whether those benefits constitute a deemed dividend under Division 7A, noting that Division 7A operates to the exclusion of FBT in relation to loans and forgiven amounts.
Practical Steps to Take Before Lodgement
The SEPL outcome is reassuring, but the practical lesson is not that family business arrangements are safe by default. It is that outcomes depend on how arrangements are structured and documented from the outset.
Get your documentation in order. If a benefit is genuinely a distribution to a beneficiary, record it properly through trustee resolutions. If it is tied to the performance of work duties, treat it as a fringe benefit and calculate FBT accordingly.
Apply the right FBT method for vehicles. The statutory formula method and the operating cost method produce different outcomes depending on usage. Understanding which applies to your situation, and whether employee contributions can reduce the liability, is worth working through carefully.
Check whether exemptions or concessions apply. Minor benefits under $300 may be exempt. Salary packaging for electric vehicles offers a legitimate planning opportunity. These are not loopholes. They are part of the system, and they are worth using.
Model your scenarios before lodgement. The ATO's compliance focus on family business arrangements has not diminished. Running the numbers before lodgement gives you time to make adjustments rather than responding to an assessment after the fact.
And it is worth keeping in mind: if the ATO identifies unreported FBT liabilities, penalties and interest will be added to the bill.
The Bottom Line
The Full Federal Court's decision in SEPL case is a meaningful win for family businesses and clarifies important limits on how FBT applies to working owners. But the case also shows just how finely balanced these issues can be, and how much depends on the facts, the structure, and the documentation.
If your family business provides non-cash benefits to working directors or family members, now is a good time to review your arrangements, make sure your documentation is in order, and understand where your FBT exposure actually sits.
Book a free clarity call to talk through your situation or get in touch with the Trekk Advisory team to start the review process today.
Trekk Advisory provides accountant-led tax, bookkeeping, and advisory services for Australian business owners. This article is general in nature and does not constitute personal advice. Please speak with a qualified adviser regarding your specific circumstances.
