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  • Common entertainment scenarios

     

    Example 1 – Christmas party on the business premises – cost is less than $300

    • A company holds a Christmas lunch on its business premises on a working day. Employees, their partners and clients attend. Food and drink is provided at the party and the company provides taxi travel home. The cost per head is $125.

    Entertainment is being provided

    • A party for employees, associates and clients is entertainment, because the purpose of the function is for people attending to enjoy themselves.

    Employees – exemption applies

    • Food and drink – the food or drink provided to employees is exempt from FBT because it's provided and consumed on a working day on the business premises.
    • Taxi travel – the taxi travel is exempt from FBT because there is a specific FBT exemption for taxi travel provided to an employee directly to or from the workplace.

    Associates – exemption applies

    • Food, drink and taxi travel: The food, drink and taxi travel provided to the employees' partners (associates) is exempt from FBT because of the minor benefits exemption.

    Clients – no FBT

    • Clients' food drink and taxi travel: There is no FBT on benefits provided to clients.

    Income tax and GST credits

    • The employer can't claim an income tax deduction or GST credits for the food, drink or taxi travel provided for employees, associates or clients.
    End of example

     

    Example 2 – Gym membership

    • A conveyancing firm pays a one-year gym membership costing $480 per person for the company's director and each employee.

    Entertainment is being provided

    • Paying for employees to have membership of a gym is providing recreation entertainment.

    Director – no exemption

    • The company will have to pay FBT on the gym membership provided to the director, because they're an employee of the company. The minor benefits exemption doesn't apply because the cost of the gym membership is $480 per employee.

    Other employees – no exemption

    • The company would have to pay FBT on the gym membership provided to its other employees. The minor benefits exemption doesn't apply, because the cost of the gym membership is $480 per employee.

    Income tax and GST credits

    • The employer can claim an income tax deduction and GST credits for the cost of the gym membership for its employees and for the FBT paid.
    End of example

     

    Example 3 – Holiday given as reward – cost is $300 or more

    • A computer manufacturer offers a reward to employees of Home Office, a retail computer store.
    • The retailer agrees that the manufacturer can offer a reward to its employees.
    • If an employee sells 200 computers in a month, they will receive a holiday consisting of two nights' accommodation at the coast and two tickets to the aquarium including a swimming-with-sharks experience.
    • The total value of each holiday package is $600.

    Entertainment is being provided

    • Providing employees with a holiday and tickets to the aquarium is recreation entertainment.

    Employees – no exemption

    • No exemption applies to the accommodation and tickets given to the employee who meets the sales target. The minor benefits exemption doesn't apply in this case because the value of the holiday package is $600.

    FBT liability – retailer

    • The retailer, as the employer, would pay the FBT in this case as the benefits are being provided under an agreement with the manufacturer.

    Income tax and GST credits

    • The retailer can claim an income tax deduction for the FBT paid.
    • The manufacturer can claim an income tax deduction and GST credits for the cost of purchasing the accommodation and tickets.
    End of example

     

    Example 4 – Golf day for employees, associates and clients – cost is $320 per person

    Paul, an employee, takes several clients and his partner to a corporate golf day paid for by his employer. The event is not held on a working day and Paul has been provided with taxi vouchers to escort his clients to and from the event. His taxi trips didn't start or end at the workplace.

    Entertainment is being provided

    Entertainment is being provided as attending a golf day is a social event and therefore its purpose is entertainment related.

    Employees – no exemption

    The food, drink and taxi travel is not exempt from FBT. The minor benefit exemption doesn't apply because the cost per person is $320. A taxi travel exemption doesn't apply as Pauls' trip did not begin or end at the workplace.

    Associates – no exemption

    The food, drink and taxi travel is not exempt from FBT. The minor benefit exemption doesn't apply because the value of the benefit is $320.

    Income tax and GST credits

    The employer is entitled to an income tax deduction and GST credit for the cost of providing the benefit to employees and their associates and the FBT paid.

    Clients – no FBT payable

    There is no FBT payable on the food or drink, and taxi travel provided to clients.

    Income tax and GST credits

    The employer can't claim an income tax deduction or GST credits for food or drink provided to the clients.

    End of example

     

    Example 5 – Celebration afternoon tea on the business premises – cost is $25 per head

    Anjelica is getting married. To celebrate, her employer holds an afternoon tea on the business premises and invites Anjelica's associates, work colleagues and clients.

    Entertainment is being provided

    The afternoon tea provided to employees, associates and clients in this situation is a social event and is therefore entertainment.

    Employees – exemption applies

    The exemption for food and drink provided and consumed on business premises on a working day applies to the employees.

    Associates – exemption applies

    The food and drink provided to the employee's associates is exempt from FBT because of the minor benefits exemption. That is, the cost of the activity is less than $300 per employee and, considering the five factors, it would be unreasonable to treat the benefit as a fringe benefit.

    Clients – no FBT

    There is no FBT on benefits provided to clients.

    Income tax and GST credits

    The employer can't claim an income tax deduction or GST credits for food or drink provided to the employees, their associates or clients.

    End of example

     

    Example 6 – Business planning day

    An insurance company organises a planning day for their managers at a conference centre. Morning and afternoon tea and a three-course lunch (excluding alcohol) are provided at a cost of $125 per head.

    Entertainment is not being provided

    Providing light meals is not considered entertainment. Although the lunch provided in this situation is work-related, the three-course meal would be elaborate and therefore considered to be entertainment.

    Employees – exemption applies

    The exemption for food and drink provided and consumed on the employer's premises on a work day doesn't apply. However, the minor benefit exemption applies as the cost of the activity is less than $300 per employee and, considering the other factors, it would be unreasonable to treat the benefit as a fringe benefit.

    Income tax and GST credits

    As the minor benefit exemption applies, the employer can't claim an income tax deduction or GST credits for food or drink provided.

    End of example
    Last modified: 29 Mar 2019QC 58442