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  • Exempt benefits and entertainment

    Some benefits are exempt from FBT, including:

    Minor benefits

    A minor benefit is exempt from FBT where it is both:

    • less than $300 in notional taxable value (that is, the value if it was taxable), and
    • unreasonable to be treated as a fringe benefit.

    To determine whether it is unreasonable for a benefit to be treated as a fringe benefit, you need to look at each of the following five factors. None of these on their own will determine if the benefit is an exempt minor benefit, so you need to look at all of them.

    • How frequently and regularly benefits that are identical or similar to the minor benefit are provided
      • the more frequently and regularly identical or similar benefits are provided, the less likely it is that the benefit will be an exempt minor benefit.
       
    • The total value of the minor benefit and identical or similar benefits
      • the greater the total value of the benefit and other identical or similar benefits, the less likely it is that the benefit will be an exempt minor benefit.
       
    • The total value of other associated benefits; that is, those provided in connection with the minor benefit
      • the greater the total of other associated benefits, the less likely it is that the minor benefit will be an exempt benefit.
       
    • The practical difficulty for you in determining the value of the minor benefit and any associated benefits
      • the more difficult it is for you to determine the value, the more likely it is that the benefit will be an exempt minor benefit
      • the more difficult it is for you to keep the necessary records in relation to the benefit, the more likely it is that the benefit will be an exempt minor benefit.
       
    • The circumstances in which the benefit and any associated benefits were provided
      • if the benefit was provided as a result of an unexpected event, such as overtime, it is more likely to be an exempt minor benefit
      • if the benefit is mainly given to the employee as a reward for services (that is, it is remuneration), it is less likely to be an exempt minor benefit.
       

    Where a benefit is provided under a salary sacrifice arrangement, it is a reward for services and the minor benefits exemption doesn't apply.

    See also:

    Minor benefits exemption applies – examples

    Example 1

    Kate sends chocolates and flowers to Jane, an employee, on the birth of her daughter. The chocolates and flowers have a taxable value of $105.

    This is an exempt minor benefit because the chocolates have a taxable value of less than $300 and, looking at the five factors, it would be unreasonable to treat the chocolates and flowers as a fringe benefit.

    End of example

     

    Example 2

    The manager of a small business gives Graham, an employee, a birthday present of two theatre tickets, valued at $234.

    This is an exempt minor benefit because the value of the tickets is less than $300 and, looking at the five factors, it would be unreasonable to treat the tickets as a fringe benefit.

    End of example

    Minor benefits exemption does not apply – examples

    Example 3

    John provides his employee Steve with a year's membership, valued at $850, to his favourite football club.

    This would not be an exempt minor benefit because the value of the membership is $300 or more.

    End of example

     

    Example 4

    Every Friday, Angela takes her two employees to a local hotel for lunch. The lunch for each employee usually consists of a main course and a couple of drinks and costs on average $45.

    This would not be an exempt minor benefit because even though the value of the Friday lunch is only $45, looking at the five factors, it would be reasonable to treat the regular Friday lunches as a fringe benefit.

    End of example

    Food or drink consumed on the premises

    Food or drink you provide is exempt from FBT if it is provided:

    • to current employees
    • on your business premises
    • on a working day.

    The food or drink is exempt regardless of whether it is prepared on your premises and whether it is entertainment. (Note that a corporate box is not considered part of your business premises.)

    But food or drink provided on your business premises to associates of employees (such as spouses) is not exempt from FBT. Where you provide food and drink on the same occasion to both employees and their associates, you may need to apportion the expenditure on a per head basis.

    Example: Food and drinks provided to employees and associates on business premises

    You provided alcoholic drinks and a buffet meal for 10 current employees and their spouses on business premises on a work day. The cost was $1,000. On a per head basis the cost of the entertainment provided to employees was $50, which is exempt from FBT because the food and drink was provided on a working day on the business premises. The cost relating to entertaining the associates ($50) will be exempt from FBT if the minor benefits exemption applies.

    End of example

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    Last modified: 29 Mar 2019QC 58433