Most, if not all, Australian Government entities provide food and/or drink to their employees, ranging from morning teas provided to small groups of employees to hosting a Christmas party for all employees. Determining whether a fringe benefit has been provided as a result of providing food and drink to employees is, therefore, a situation faced by most entities.
Australian Government entities at times also provide some recreation entertainment to their employees, or someone else provides recreation entertainment to their employees.
The FBT treatment of entertainment provided by Australian Government entities will depend on their income tax status. Australian Government entities will be either:
- income tax-exempt
- income tax-exempt but pay income tax equivalents
- income tax paying, in accordance with Australian income tax laws.
The majority of Australian Government entities are income tax-exempt. Therefore, this section of the information is written for income tax-exempt entities, including those entities that pay income tax equivalents. It provides guidance to help understand when the provision of food, drink or recreation will result in a tax-exempt body entertainment benefit.
Those Australian Government entities that are required to pay income tax should refer primarily to Fringe benefits tax and entertainment and Taxation Ruling TR 97/17 for guidance on the FBT treatment of entertainment provided by them.
In determining how to treat the provision of food and drink, it is necessary to first consider whether or not the benefit is entertainment and, if it is entertainment, whether or not it is a tax-exempt body entertainment fringe benefit.
If the benefit is not a tax-exempt body entertainment benefit, it is necessary to decide whether it is an expense payment, property or residual benefit.
It is also necessary to consider whether the benefit provided is able to be treated as an exempt property benefit or exempt minor benefit.
Australian Government entities have the option of valuing entertainment provided by way of food, drink and associated accommodation or travel as 'meal entertainment fringe benefits'.