• How to calculate the taxable value of entertainment

    The actual method of valuing entertainment

    The information, tables and examples in this guide are all based on choosing the actual method of valuing entertainment. The taxable value of the food or drink or recreation, and the associated accommodation or travel, is the actual amount you pay for the benefit of the employee.

    If you use the actual method of valuing entertainment FBT will only apply to entertainment you provide to your employees and/or their associates. Entertainment you provide to your clients will not be subject to FBT under this valuation method.

    When you provide entertainment to both employees and non-employees (for example, clients), only the part of the entertainment relating to employees and their associates is subject to FBT. If you cannot easily determine the actual expenditure, you can use a 'per head' basis of apportionment.

    Example: Apportioning per head
    Mary entertains three of her employer's clients at a local restaurant. Her employer uses the actual method to value entertainment. Mary pays, and is reimbursed, for the full cost of the meals. The benefit provided to Mary is an expense payment fringe benefit. The taxable value of that benefit is 25% of the amount reimbursed to Mary.

    End of example

    Hiring or leasing entertainment facilities

    Where you provide entertainment by hiring or leasing entertainment facilities (entertainment facility leasing expenses), the taxable value is the cost of the activity.

    Other methods of valuing entertainment

    Where tax-exempt body entertainment fringe benefits arise from providing meal entertainment, you may choose to classify these fringe benefits as meal entertainment fringe benefits. 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 during the FBT year as meal entertainment fringe benefits.

    Providing meal entertainment fringe benefits means:

    • providing entertainment by way of food, drink
    • providing accommodation or travel in connection with such entertainment, or
    • paying or reimbursing expenses incurred in obtaining something covered by the above points.

    You can choose the:

    • 50:50 split method for valuing meal entertainment fringe benefits and entertainment facility leasing expenses
    • 12-week method for valuing meal entertainment fringe benefits.

    Only meal entertainment can be valued using the two methods mentioned above.

    The taxable value of the recreation component of tax-exempt body entertainment is generally equal to the cost of the activity, for example, the entry fee for a golf day.

    If you choose to classify a fringe benefit as a meal entertainment fringe benefit, you have to classify all fringe benefits arising from providing meal entertainment during the FBT year as such.

    Both of these methods are based on your total meal entertainment expenditure. This includes expenditure that may otherwise be exempt from FBT or not normally subject to FBT, for example providing food and drink to employees on your business premises and/or providing meals for clients.

    You must decide to classify fringe benefits as meal entertainment no later than the day your FBT return is due to be lodged with us or if you do not have to lodge, by May 21.

    You are not eligible to make an election if the meal entertainment is provided under salary packaging arrangements on or after 1 April 2016.

    Similarly, you are not able to elect to use the 50:50 split method where you provide benefits attributable to entertainment facility leasing expenses on or after 1 April 2016.

    See also:

    Which method is best for you?

    When determining which meal entertainment valuation method is best for your organisation, factors to consider are:

    • who you provide entertainment to (employees, associates or clients)
    • how often you provide entertainment
    • which method results in the lowest FBT liability
    • administration costs of each method for your organisation.
      Last modified: 29 Nov 2016QC 19917