15.5 Does an exemption apply?

There are only very limited circumstances under which an exemption will apply to entertainment provided by way of food or drink.

PBIs, HPCs, public hospitals, non-profit hospitals and public ambulance services

The provision of benefits that constitute the provision of meal entertainment may be exempt from fringe benefits tax (FBT) when provided by public benevolent institutions (PBIs), health promotion charities (HPCs), public hospitals, non-profit hospitals and public ambulance services.

From 1 April 2016, meal entertainment provided under a salary packaging arrangement by these employers is no longer an excluded fringe benefit and is subject to a separate capping threshold.

See also:

Providing meal entertainment means:

  • providing entertainment by way of food or drink
  • providing accommodation or travel connected with such entertainment
  • paying or reimbursing expenses incurred by an employee for the above.

Minor benefits exemption

Depending on the entertainment provided, 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 if either:

  • the entertainment provided is incidental to the entertainment provided 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 to employers who elect to value the entertainment as meal entertainment using the 50-50 split method.

Example: Light refreshment that is incidental to entertainment provided to outsiders

A tax-exempt body hosts a morning tea at a local cafe for its sponsors at which they provide finger food, tea, coffee and soft drinks. Some employees attend to thank the sponsors on behalf of the tax-exempt body for their assistance throughout a particularly difficult year. It is unusual for the tax-exempt body to host this type of function and the cost per head is $15.

Providing morning tea to employees in these circumstances would meet the requirements of the minor benefits exemption.

Example: Function recognising special achievements of employee

A project manager, who is an employee of a tax-exempt body, is awarded 'Project Manager of the Year' by an external organisation. A dinner is held on the tax-exempt body's premises for the presentation of the award. The following people attend the dinner:

senior management of the tax-exempt body

the employee receiving the award and their family

representatives from the external organisation presenting the award.

In these circumstances, the minor benefits exemption applies to the employee receiving the award and their family.

End of example
    Last modified: 09 Aug 2016QC 17811