Entertainment Fringe Benefits

For FBT purposes “entertainment” includes

  • entertainment by way of food, drink or recreation
  • accommodation or travel in connection with, or to facilitate the provision of, such entertainment.

Update – Cap on packaged entertainment

In a 2015 Federal Budget measure which targets Not For Profits, from 1 April 2016 a grossed-up cap of $5,000 will apply to the amount of salary-sacrificed ‘meal entertainment’ and ‘entertainment facility leasing expenses’ which qualify for the FBT exemption or the rebate (depending on the type of employer).

Any excess to be counted in calculating the existing FBT exemption or rebate cap, and all salary packaged entertainment benefits will become reportable.

See further:

entertainment-fringe-benefits-taxExamples

Common examples of taxable entertainment fringe benefits provided by the Tax Office include:

  • business lunches and drinks, cocktail parties and staff social functions
  • providing entertainment to employees and clients by providing access to sporting or theatrical events, sightseeing tours, holidays and so on
  • accommodation and travel when it is provided in connection with, or to facilitate, activities such as entertaining clients and employees over a weekend at a tourist resort, or providing them with a holiday.

Is it Entertainment? – Tax Ruling TR 97/17

The ruling outlines a series of tests which are summarised in the following table. Not all factors have equal significance – please read TR 97/17 for full context and see further references and checklists at the foot of this page. This is a simplified summary for general guidance and cannot be relied on as the basis of a decision.

See TR 97/17 – “Income tax and fringe benefits tax: entertainment by way of food or drink”

TR 97/17 – Is it entertainment? 
 What food and drink is provided?More or less likely to be “entertainment”
A multi-course meal with alcoholMore likely
Sandwiches and juiceLess likely
 Where is it provided?More or less likely to be “entertainment”
Off the business’s premisesMore likely
On the business’s premisesLess likely
 When is it provided?More or less likely to be “entertainment”
Outside business hoursMore likely
Within business hoursLess likely
 Why is it provided?More or less likely to be “entertainment”
An entertainment or social purposeMore likely
An incidental business purposeLess likely

Exclusions

Common exclusions or exemptions to FBT on entertainment include:

  • entertainment provided to clients (not subject to FBT, but not tax deductible either)
  • food and/or drink for current employees on your business premises on a working day are exempt property benefits  (see more here..) – and see also Tax Ruling IT 2625 “Income tax and fringe benefits tax: entertainment – morning and afternoon teas; light meals; and in-house dining facilities”
  • minor entertainment less than $300 (incl. GST) per employee (see here)
  • Meal entertainment provided by PBIs, HPCs, public hospitals, non-profit hospitals and public ambulance services to employees is exempt from FBT. This exemption only applies to meal entertainment and not to recreation. See Meal entertainment provided by PBIs etc.

Calculations

The taxing of entertainment and related benefits falls into a number of possible FBT categories:

  • Meals entertainment – choose calculation method
    • 50/50 split method
    • 12 week register method, or
    • actual expenditure method
  • Expense payment fringe benefit
  • Property fringe benefit
  • Residual fringe benefit
  • Tax exempt body entertainment fringe benefit

For calculation methodology in general, see Calculating fringe benefits tax

For calculation methodology and worksheets – see doc-word CPA Australia FBT checklist

Further information

 

 

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This page was last modified 2018-12-10