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  • Calculating the taxable value of entertainment

    Where entertainment includes both meals and recreation you calculate the taxable value (including apportioning the cost of benefits provided to employees and others) using the actual value method.

    Where entertainment does not include recreation, you may choose to value food, drink and associated accommodation or travel as 'meal entertainment' under specific valuation rules.

    The information, tables and examples in this section are all based on the actual method of valuing entertainment.

    Actual method of valuing entertainment

    The taxable value of the food or drink or recreation, and the associated accommodation or travel, is the actual amount you pay for the benefit of the employee.

    When you provide entertainment to both employees and non-employees (such as clients), only the entertainment provided to employees and their associates is subject to FBT. If you can't easily determine the actual expenditure, you can use a 'per head' basis of apportionment.

    Example: apportioning per head

    Mary entertains three of her employer's clients at a local restaurant. Her employer uses the actual method to value entertainment. Mary pays, and is reimbursed, for the full cost of the meals. The benefit provided to Mary is an expense payment fringe benefit. The taxable value of that benefit is 25% of the amount reimbursed to Mary.

    End of example

    Hiring or leasing entertainment facilities

    Where you provide entertainment by hiring or leasing entertainment facilities (entertainment facility leasing expenses), you calculate the taxable value using either:

    • the cost of the activity, or
    • the 50:50 split method – the taxable value is 50% of your total expenditure on entertainment facility leasing expenses for all people (irrespective of whether they're employees, clients or others) during the FBT year. This method can't be used where the benefit has been provided under a salary packaging arrangement.

    Meal entertainment

    Where entertainment does not include recreation, you may choose to value food, drink and associated accommodation or travel as 'meal entertainment', unless the entertainment is provided under a salary packaging arrangement. If you make this choice, instead of using the per head basis to apportion benefits between staff (and their associates) and others, you calculate the taxable value using either:

    • the 50:50 split method – the taxable value is 50% of your total expenditure in providing meal entertainment to all people (irrespective of whether they're employees, clients or others) during the FBT year, or
    • the 12-week method – the taxable value is your total expenditure in providing meal entertainment to all people during the FBT year, multiplied by a percentage calculated from a register kept for a continuous period of 12 weeks. The register must include details of the meal entertainment provided, including costs and the recipients.

    Meal entertainment includes:

    • providing entertainment by way of food or drink
    • providing accommodation or travel in connection with, or to facilitate the provision of, such entertainment, or
    • paying or reimbursing expenses incurred by the employee for the above.

    Recreation includes:

    • amusement, sport and similar leisure time activities, such as a game of golf, theatre or movie tickets, a joy-flight or a harbour cruise.

    If you choose to classify a fringe benefit as a meal entertainment fringe benefit, you have to classify all fringe benefits arising from providing meal entertainment during the FBT year as such.

    Both of these methods are based on your total meal entertainment expenditure, including expenditure that may otherwise be exempt from FBT or not normally subject to FBT, such as providing food and drink to employees on your business premises and providing meals for clients.

    You must decide to classify fringe benefits as meal entertainment no later than the day your FBT return is due to be lodged, or if you don't have to lodge, by May 21.

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    Last modified: 29 Mar 2019QC 58440