14.8 How to calculate the taxable value of a meal entertainment fringe benefit
There are two methods you can use to calculate the taxable value of meal entertainment fringe benefits:
- 50-50 split method
- 12-week register method
These options are also available to income tax-exempt employers. Remember, you cannot elect to classify the provision of meal entertainment as meal entertainment fringe benefits if they are provided under a salary packaging arrangement on or after 1 April 2016. You must therefore use the respective valuation rule to calculate the taxable value according to the type of benefit provided. Both the 50-50 split and 12-week register methods are based on your total meal entertainment expenditure. This includes expenditure that might otherwise be exempt from FBT or not normally subject to FBT.
Under the 50-50 split method, the taxable value is 50% of your total meal entertainment expenditure.
The 12-week register method is based on the total meal entertainment expenditure and an appropriate percentage, as evident from the 12-week register.
Where you are reimbursed by a third party for the cost of meal entertainment you provide to an employee, the value of the benefit received by the employee is not reduced. The arrangement between the employer and the third party is unrelated to the benefit provided to the employee.
If you choose to classify a fringe benefit as a meal entertainment fringe benefit, you have to classify all fringe benefits arising from the provision of meal entertainment as such. You may elect to classify benefits as meal entertainment regardless of whether or not you did so in a previous year.
You must decide to classify fringe benefits as meal entertainment no later than the day on which your FBT return is due to be lodged with us or, if you don't have to lodge a return, by 21 May.
You need to carefully consider the implications of both the 50-50 split method and the 12-week register method of calculating the taxable value of meal entertainment fringe benefits. It may be that a better option for you is to determine the taxable value based on actual expenditure.
When determining which meal entertainment valuation method is the best for you, factors you may consider include:
- who do you provide entertainment to (employees, associates or clients)
- how often do you provide entertainment
- which method results in the lowest FBT liability
- the administration costs of each method for your organisation.
There is no need to notify us of the method you choose as your business records are sufficient evidence of this.
If you don't elect to use one of these methods, you must use the respective valuation rule to calculate the taxable value according to whether the benefit is an expense payment fringe benefit, a property fringe benefit, a residual fringe benefit or a tax-exempt body entertainment fringe benefit.