As Fringe Benefits Tax (FBT) lodgement season approaches, family businesses should carefully review the perks they provide to working directors and family members. A high-profile case involving luxury vehicles provided to three brothers who run a large business empire through a discretionary trust highlights the complexities — and potential risks — of informal arrangements. While the case initially appeared to expand FBT exposure, the latest decision handed down by the Full Federal Court offers reassurance that not all benefits provided to working owners will automatically trigger FBT. 

What may seem like harmless "owner entitlements" or beneficiary perks can still attract scrutiny from the Australian Taxation Office (ATO). However, the courts have emphasised the importance of substance, documentation, and the capacity in which benefits are provided. 

The Background 

Three brothers operate a substantial business involving petrol stations, convenience stores, fast food, tobacco outlets, and gift shops. They serve as shareholders, directors, and key decision-makers (with powers as appointors under the trust deed), working long hours in executive-style roles without drawing formal cash salaries or wages. Profits and benefits flow through the family discretionary trust (SFT Trust), of which their corporate trustee (SEPL Pty Ltd) is the trustee. The brothers and family members are beneficiaries. 

The business provided them with exclusive access to over 40 luxury and high-performance vehicles (including Bentleys and Ferraris) for both business and personal use. Costs associated with personal use were debited to the matriarch’s beneficiary account and later cleared by trust distributions — a mechanism consistent with beneficiary entitlements rather than employment remuneration. 

The ATO assessed FBT on the private use component of these car benefits, arguing they were fringe benefits 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 (Re BQKD and Commissioner of Taxation [2024] AATA 1796). It found that the brothers were not "employees" for FBT purposes and that, even on a hypothetical basis, the vehicle benefits were not provided "in respect of" any employment. The benefits were instead linked to their capacities as beneficiaries, proprietors, and controlling family members. 

The Commissioner appealed to a single judge of the Federal Court, who in June 2025 (Commissioner of Taxation v SEPL Pty Ltd as trustee of the SFT Trust [2025] FCA 581) allowed the appeal. Justice O'Sullivan held that the brothers were employees under the broad FBT definitions (including via the hypothetical deeming rule in s 137 of the Fringe Benefits Tax Assessment Act 1986 (Cth) — FBTAA) and that the benefits were provided in respect of their employment. 

The taxpayer then appealed to the Full Federal Court. On 27 March 2026, in SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36 (Perry, O’Callaghan and Thawley JJ), the Full Court unanimously allowed the appeal. The Full Federal Court basically restored the AAT's decision. 

Key findings: 

• Employee status: It was open to the AAT to conclude the brothers were not "employees" for FBT purposes. The definitions of "employee" and "salary or wages" ultimately draw on common law concepts of employment. The AAT properly considered factors such as the absence of employment contracts, no wages or leave entitlements, the presence of employed managers for operational roles, and the brothers' control being referable to their proprietorial and governance roles rather than traditional employment. 
• "In respect of" employment: Even assuming (hypothetically) that the brothers were employees, it was open to the AAT to find there was no sufficient material connection between the benefits and any employment relationship. Here, access to the vehicles was not a substitute for salary or wages. The AAT correctly weighed competing explanations and found the benefits arose primarily from family/trust relationships, not employment. 

Why This Matters for Your Business 

The case underscores the ATO's ongoing focus on dual-capacity individuals (e.g., directors who are also beneficiaries and active workers in trust structures). However, the Full Court's reasoning provides important boundaries: 



• Informal perks for working family members in discretionary trusts are not automatically subject to FBT. 
• Substance and documentation matter: How benefits are provided, funded, and recorded (e.g., via trust distributions vs. remuneration) can help in determining the outcome. 
• Common law employment concepts remain relevant in interpreting FBT definitions. 
• Blending roles does not inevitably trigger FBT if the dominant characterisation is beneficiary-based. 

Family businesses should still exercise caution. The ATO may continue to scrutinise similar arrangements, particularly where benefits appear to represent a substitute for remuneration or lack clear documentation. Superannuation contributions or executive titles can sometimes support employee characterisation, though they were not decisive here. 

Practical Steps to Protect Your Business 

Don't wait for an audit—review your arrangements now: 

• Document clearly: If a benefit is a trust distribution to a beneficiary, record it via trustee resolutions. If it's tied to work duties, treat it as a fringe benefit and calculate FBT accordingly. Or confirm why they fall outside the regime. 
• Consider FBT properly: Apply statutory formulas or operating cost methods for cars. Employee contributions (e.g., reimbursing personal use) can reduce or eliminate liability. 
• Consider exemptions/concessions: Minor benefits under $300, or salary packaging for EVs, might help. 
• Audit overlaps: We also need to check for Division 7A loan issues or deemed dividends if benefits flow through private companies. 
• Plan proactively: With ATO focus intensifying (as highlighted in recent compliance updates), model scenarios to minimise tax without losing commercial perks. 

Remember that if the ATO discovers some unreported FBT liabilities then the business can also be exposed to penalties and interest. 

The SEPL case ultimately favours the taxpayer and reinforces that FBT does not capture every benefit provided to working owners in family trust structures. However, every arrangement turns on its specific facts and evidence. 

If your business provides vehicles, phones, travel, or other perks to family members actively involved in operations — especially without formal salaries — now is a good time to review. Our team can help analyse your structures, run FBT calculations or risk assessments, and implement practical fixes to protect profits while maintaining flexibility. 

The law in this area is fact-sensitive and continues to evolve. Professional advice tailored to your circumstances is essential.