To work out the fringe benefits tax (FBT) on entertainment-related benefits you've provided, you first need to know the taxable value of the benefits.
You can use the actual value of the benefits – that is, the amount you paid. If you provided benefits to employees and others, you must apportion the cost of the benefits.
If the entertainment does not include recreation, you can choose to use meal entertainment valuation rules to work out the taxable value.
Using this method, the taxable value of food, drink or recreation, and any associated accommodation or travel, is the actual amount you pay for the benefit of the employee.
If you provide entertainment to employees and non-employees (such as clients), only the entertainment for employees and their associates is subject to FBT. If you can't easily work out the actual expenditure on employees and their associates, you can apportion the expenditure on a per head basis.
Example: apportioning per head
Mary entertains 3 of her employer's clients at a local restaurant. Mary pays, and is reimbursed for, the full cost of the meals.
Mary's employer works out the taxable value of the benefit using the actual value method on a per-head basis. Therefore the taxable value of the benefit is 25% of the amount reimbursed to Mary.End of example
Hiring or leasing entertainment facilities
If you hire or lease entertainment facilities (such as a corporate box, function room or boat), you can calculate the taxable value using either:
- the cost of the activity
- the 50:50 split method – the taxable value is 50% of your total expenditure on entertainment facility leasing expenses for all people, whether they're employees, clients or others, during the FBT year.
If you provide a benefit under a salary packaging arrangement, you must use the actual cost.
For more information about the 50:50 split method for recreational facilities, see FBT guide: 14.12 Taxable value of recreational entertainment.
If entertainment doesn't include recreation, you can classify it as 'meal entertainment' and use one of the following methods to estimate the taxable value of food, drink and any associated accommodation or travel:
- The 50:50 split method – the taxable value is 50% of your total expenditure on all meal entertainment for all people (irrespective of whether they're employees, clients or others) during the FBT year.
- The 12-week method
1. Keep a register of meal entertainment, including costs and recipients, for a continuous period of 12 weeks.
2. Work out the percentage of your expenditure on employees and their associates.
3.The taxable value of meal entertainment is this percentage of your total expenditure on all meal entertainment for all people during the FBT year.
Both of these methods are based on your expenditure on all meal entertainment for all people during the FBT year. This includes expenditure that may otherwise be exempt from FBT or not normally subject to FBT. For example, you include expenditure on:
- food and drink provided to employees on your business premises
- meals for clients.
If you choose to use one of the meal entertainment valuation methods:
- you must use if for all meal entertainment you provide during the FBT year
- you must make your choice no later than the day your FBT return is due (or, if you don't have to lodge, by 21 May)
- you don't need to notify us – your business records are sufficient evidence of your choice.
You cannot use these methods if the entertainment is provided under a salary packaging arrangement.
For more information about these methods, see FBT guide: 14.8 How to calculate the taxable value of a meal entertainment fringe benefit.
If a benefit is provided to your employees:
- by an associate of your business or organisation, your associate must tell you the value of the benefits by 21 April
- under an arrangement with a third party, you must take reasonable steps to determine the value of the benefit.