15.13 If the benefit is recreational entertainment, does an exemption apply?
There are only limited circumstances in which an exemption applies to recreational entertainment you provide.
PBIs, HPCs, public hospitals, non-profit hospitals and public ambulance services
Where you provide benefits that are wholly or partly attributable to entertainment facility leasing expenses, they may be exempt from FBT when provided by PBIs, HPCs, public hospitals, non-profit hospitals and public ambulance services.
From 1 April 2016, a benefit that is wholly or partly attributable to entertainment facility leasing expenses provided under a salary packaging arrangement by these employers is no longer an excluded fringe benefit and is subject to a separate capping threshold.
Generally, the transport to and from an entertainment facility will be a separate benefit that will not be part of the entertainment facility leasing expense. The transport in these circumstances would not be a benefit that is partly or wholly attributable to entertainment facility leasing expenses.
However, for example, the reimbursement of the cost incurred by an employee in purchasing an all-inclusive package from a travel agent that includes both the travel and the hire or lease of holiday accommodation is a single tax-exempt body entertainment benefit. The benefit is one whose taxable value is partly attributable to entertainment facility leasing expenses being the lease or hire of the holiday accommodation. As the tax-exempt body entertainment benefit is partly attributable to entertainment facility leasing expenses, the whole of the tax-exempt body entertainment benefit will be exempt from FBT.
The entertainment facility leasing expenses that are exempt from FBT for these purposes can be incurred by you or your employee.
Minor benefits exemption
Depending on the entertainment you provide, the benefit may qualify for the minor benefits exemption. As well as the general criteria for deciding whether a minor benefit should be treated as an exempt benefit (refer to section 20.8 of Fringe benefits tax exempt benefits), for tax-exempt bodies, the exemption is available only where either of the following apply:
- the entertainment you provide is incidental to entertainment you provide to outsiders and does not consist of a meal other than light refreshments
- a function is held on your business premises solely as a means of recognising the special achievements of your employee in a matter relating to the employment of your employee.
In these circumstances, only benefits provided to your employee and their associates are exempt from FBT.
This exemption does not apply if you elect to value entertainment facility leasing expenses using the 50-50 split method.
Example: Entertainment you provide that is incidental to entertainment you provide to outsiders
A tax-exempt body hosts a fundraising movie premiere. Staff of the tax-exempt body attend to meet and greet ticket holders, usher ticket holders to their seats and to serve light refreshments. This will be an exempt minor benefit as the provision of the recreational entertainment is incidental to the provision of entertainment to people outside of the tax-exempt body.
End of example