Fringe benefits tax (FBT) and entertainment for small business
About this guide
This guide helps small business employers to understand how fringe benefits tax (FBT) and entertainment works and to decide whether or not they may have to pay FBT.
You should use this guide if you are a small business employer and you sometimes provide your employees and/or their associates with food and drink, gifts or leisure activities. Depending on the circumstances their provision may be classified as providing entertainment and you may have to pay fringe benefits tax (FBT).
In this guide, we help you to:
- decide whether you are providing entertainment to your employees
- determine when a benefit is exempt
- calculate the taxable value of entertainment benefits using the actual method, and
- keep records so that you can calculate your FBT payable.
- explain how you can reduce your FBT liability, possibly to nil, and
- provide many examples of the most common situations in which entertainment is provided by small businesses.
Fringe benefits provided by income-tax-exempt organisations are treated differently and are not explained in this guide. There are different rules for tax-exempt bodies because they do not pay income tax. If you are an income-tax-exempt organisation please refer to FBT and entertainment for non-profit organisations or FBT and entertainment for government.
Although we generally refer to fringe benefits provided to employees by an employer, please note that fringe benefits can also be provided to employees' associates (such as a family member). Further, fringe benefits can also be provided by an associate of the employer or a third party by arrangement with the employer.
End of attention
For information about other types of benefits, please refer to our publication Fringe benefits tax - a guide for employers (NAT 1054).