• Is the benefit exempt from FBT?

    If your organisation provides only exempt benefits, you will not have to pay FBT. Some common exempt benefits are outlined below.

    PBIs, HPCs, Non-profit hospitals and public ambulance services

    Meal entertainment provided by PBIs, HPCs, public hospitals, non-profit hospitals and public ambulance services to employees is exempt from FBT unless it is provided under a salary packaging arrangement on or after 1 April 2016.

    From that date, meal entertainment provided under a salary packaging arrangement will not be exempt where the grossed-up taxable value of the salary packaged meal entertainment (and salary packaged entertainment facility leasing expenses) exceeds $5,000.

    Providing meal entertainment means:

    • providing entertainment by way of food or drink
    • providing accommodation or travel connected with such entertainment, or
    • paying or reimbursing expenses incurred by an employee for the above.

    Property benefit exemption

    Food or drink that is a property fringe benefit – that is, not a tax-exempt body entertainment fringe benefit – is exempt from FBT when provided to and consumed by:

    • 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.

    But food or drink provided on business premises to associates of employees (for example, 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.

    Taxi travel

    If you pay for an employee's taxi travel, it will be an exempt benefit if the travel is a single trip beginning or ending at the employee's place of work. This exemption only applies to employees, it does not apply to employees' associates.

    Taxi travel

    Exempt from FBT

    FBT applies

    Employee travels from work to an external venue (such as a restaurant or home)

    X

     

    Employee travels from an external venue (such as a restaurant or home) to work

    X

     

    Employee travels from an external venue (such as a restaurant) to another external venue (such as home)

     

    X

    Minor benefits exemption

    Depending on the entertainment provided the benefit may qualify for the minor benefits exemption. The steps below will help you determine if the benefit qualifies for the minor benefits exemption.

    Step

    Action

    1

    Determine whether the taxable value of the benefit is less than $300 per employee (the value of the benefit includes the value of benefits provided to the employee's associates).

    If the taxable value:

    • is $300 or more, the minor benefits exemption does not apply
    • is less than $300, continue to step 2.
     

    2

    Determine whether the benefit is a tax-exempt body entertainment fringe benefit.

    If the benefit:

    • is a tax-exempt body entertainment fringe benefit, continue to step 3.
    • is not a tax-exempt body entertainment fringe benefit, go to step 4.
     

    3

    If it is a tax-exempt body entertainment fringe benefit the minor benefits exemption will only be available in certain circumstances.

    These circumstances are when:

    • the provision of the entertainment is incidental to the provision of entertainment to outsiders, and does not consist of a meal other than light refreshments, or
    • a function is held on your business premises solely as a means of recognising the special achievements of your employee in a matter relating to the employment of your employee. Where the benefit is provided in this circumstance, the minor benefits exemption only applies to the employee in question and his or her associates.

    If the tax-exempt body entertainment fringe benefit is:

    • not provided in these circumstances, the minor benefits exemption does not apply, or
    • provided in these circumstances, continue to step 4.
     

    4

    Determine whether it is unreasonable to treat the minor benefit as a fringe benefit.

    • If it is unreasonable to treat the benefit as a fringe benefit, the minor benefits exemption applies.
    • If it is not unreasonable to treat the benefit as a fringe benefit, the minor benefits exemption does not apply.
     

     

    Example: A function to recognise special achievements of an employee
    Michele, an employee of a large northern NSW bowls club, is awarded 'Best client service staff member of the year' by the Northern NSW Bowling Clubs Association. A dinner to celebrate the presentation of the award is held by Michele's bowls club, and takes place on their premises. The cost per head is $60. Staff from Michele's bowls club and neighbouring clubs, Michele and her husband, and representatives from the bowls clubs' association who present the award attend the dinner.

    The minor benefits exemption applies in this circumstance to the employee receiving the award and their family, but not to the other employees.

    End of example

    How do you decide whether it is unreasonable to treat the benefit as a fringe benefit?

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

    Factors to consider

    Explanation

    a

    How often benefits identical or similar to the minor benefit (or benefits given in connection with the minor benefit) are provided.

    The more frequently and regularly associated benefits are provided, the less likely it is that the benefit will qualify as an exempt benefit.

    b

    The sum of the values of the minor benefit and other identical or similar benefits to the minor benefit.

    The greater the total of the benefit and other identical or similar benefits, the less likely it is that the benefit will be an exempt benefit.

    c

    The likely total of the values of other associated benefits, that is, those provided in conjunction with the minor benefit.

    The greater the total of other associated benefits, the less likely it is that the minor benefit will qualify as an exempt benefit.

    d

    The practical difficulty for you in determining what would be the taxable value of the minor benefit and any associated benefits if they were treated as fringe benefits. This includes how difficult it is for you to keep the necessary records in relation to the benefits.

    The more difficult it is for you to determine the value, the more likely it is that the benefit will be an exempt 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 benefit.

    e

    The circumstances in which the benefit and any associated benefits were provided. This would include consideration of the purpose of an occasion for which the benefit was given.

    If the benefit was provided as a result of an unexpected event, such as overtime, it is more likely to be an exempt 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 benefit.

    Minor benefits exemption examples

    Example

    Minor benefits exemption applies

    Minor benefits exemption does not apply

    The manager of a non-profit industry training organisation gives flowers to Jane, an employee, on the birth of her daughter. The flowers have a taxable value of $55.

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

     

    Several times a year Angela takes her two team members to a local hotel for lunch. Her employer pays for the lunches. The lunch for each employee usually consists of a main course and a couple of drinks and costs on average $35.

     

    This is not an exempt minor benefit. The meals at the hotel would be classified as tax-exempt body entertainment.

    The minor benefits exemption does not apply to minor entertainment benefits provided to employees of income-tax exempt organisations.

    John provides his employee Steve with a $200 voucher for a city sports store as a reward for his excellent work on a project.

    This is an exempt minor benefit because the value of the voucher is less than $200 and it would be unreasonable to treat the voucher as a fringe benefit.

     

    The manager of a non-profit child care centre gives Graham, an employee, two theatre tickets to a popular show. The tickets have a total value of $210.

     

    This is not an exempt minor benefit because the theatre tickets to a show are classified as recreation and as such would be tax-exempt body entertainment.

    The minor benefits exemption does not apply to minor entertainment benefits provided to employees of income-tax exempt organisations

      Last modified: 29 Nov 2016QC 19917