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  • Common entertainment scenarios

    Example 1 – Christmas party on the work premises

    • Christmas party held at the workplace: cost is less than $300
    • A company holds a Christmas lunch on its business premises on a working day. Employees, their partners and clients attend. Food and drink is provided at the party and the company provides taxi travel home from the party. The cost per head is $125.

    Entertainment is being provided

    • A party for employees, associates and clients is entertainment, because the purpose of the function is for people attending to enjoy themselves.

    Employees – exemption applies

    • Food and drink – the food or drink provided to employees is exempt from FBT because it is provided and consumed on a working day on the business premises.
    • Taxi travel – the taxi travel is exempt from FBT because there is a specific FBT exemption for taxi travel provided to an employee directly to or from the workplace.

    Income tax and GST credits

    • The employer could not claim an income tax deduction or GST credits for the food, drink or taxi travel provided for employees, associates or clients.

    Associates – exemption applies

    • Food, drink and taxi travel: The food, drink and taxi travel provided to the employees' partners (associates) is exempt from FBT because of the minor benefits exemption.

    Income tax and GST credits

    • The employer could not claim an income tax deduction or GST credits for the food, drink or taxi travel provided for employees, associates or clients

    Clients – no FBT

    • Clients' food drink and taxi travel: There is no FBT on benefits provided to clients

    Income tax and GST credits

    • The employer could not claim an income tax deduction or GST credits for the food, drink or taxi travel provided for employees, associates or clients.
    End of example

     

    Example 2 – Gym membership

    • Gym Membership costs $480 per employee
    • A conveyancing firm pays a one year gym membership costing $480 for the director of the company and each of its employees.

    Entertainment is being provided

    • Paying for employees to have membership of a gym is providing recreational entertainment.

    Director – no exemption

    • The company would have to pay FBT on the gym membership provided to the director, because the director is an employee of the company. The minor benefits exemption does not apply in this case because the cost of the gym membership is $480 per employee.

    Other employees – no exemption

    • The company would have to pay FBT on the gym membership provided to its other employees. The minor benefits exemption does not apply in this case, because the cost of the gym membership is $480 per employee.

    Income tax and GST credits

    • The employer can claim an income tax deduction and GST credits for the cost of providing the gym membership to its employees and for the FBT paid.
    End of example

     

    Example 3 – Holiday as a reward

    • Holiday given as a reward: cost is $300 or more
    • A computer manufacturer offers a reward to employees of Home Office, a retail computer store.
    • The retailer agrees that the manufacturer can offer a reward to its employees.
    • If an employee sells 200 computers in a month, they will receive a holiday consisting of two nights' accommodation at the coast and two tickets to the aquarium including a swimming-with-sharks experience.
    • The total value of each holiday package is $600.

    Entertainment is being provided

    • Providing employees with a holiday and tickets to the aquarium is recreational entertainment.

    Employees – no exemption

    • No exemption applies to the accommodation and tickets given to the employee who meets the sales target. The minor benefits exemption does not apply in this case because the value of the holiday package is $600.

    FBT liability – retailer

    • The retailer would pay the FBT in this case as the benefits are being provided under an agreement with the manufacturer.

    Income tax and GST credits

    • The retailer can claim an income tax deduction for the FBT paid.
    • The manufacturer can claim an income tax deduction and GST credits for the cost of purchasing the accommodation and tickets.
    End of example

     

    Example 4 – Golf day for employees, associates and clients

    Golf day for employees, clients and associates: cost is $320 per person

    Paul, an employee, takes several clients and his partner to a corporate golf day paid for by his employer. The event is not held on a working day and Paul has been provided with taxi vouchers to escort his clients to and from the event.

    Entertainment is being provided

    Entertainment is being provided as attending a golf day is a social event therefore the purpose of the day is entertainment related.

    Employees – no exemption

    The food, drink and taxi travel is not exempt from FBT in this circumstance. The minor benefit exemption will not apply because the cost per person is $320. A taxi travel exemption will not apply as the trip did not begin or end at the workplace.

    Income tax and GST credits

    The employer is entitled to an income tax deduction and GST credit for the cost of providing the benefit and the FBT paid.

    Associates – no exemption

    The food, drink and taxi travel is not exempt from FBT in this circumstance. The minor benefit exemption will not apply because the value of the benefit is $320.

    Income tax and GST credits

    The employer is entitled to an income tax deduction and GST credit for the cost of providing the benefit and the FBT paid.

    Clients – no FBT payable

    There is no FBT payable on the food drink, and taxi travel provided to clients.

    Income tax and GST credits

    The employer cannot claim an income tax deduction or GST credits for food or drink provided to the client.

    End of example

     

    Example 5 – Celebration afternoon tea

    Afternoon tea provided on the business premises: cost is $25 per head

    Anjelica is getting married. To celebrate the occasion her employer holds a 'cheese and wine' afternoon tea on the work premises and invites Anjelica's clients and associates and other staff members.

    Entertainment is being provided

    The afternoon tea provided to employees, associates and clients in this situation is a social event and is therefore entertainment.

    Employees – exemption applies

    The exemption for food and drink provided and consumed on business premises will apply to the employees as the food and drink provided is consumed by the employee on a working day at the work premises.

    Income tax and GST credits

    The employer could not claim an income tax deduction or GST credits for food or drink provided.

    Associates – exemption applies

    The food and drink provided to the employee's associates is exempt from FBT because of the minor benefits exemption. That is, the cost of the activity is less than $300 per employee and, considering the five factors, it would be unreasonable to treat the benefit as a fringe benefit.

    Income tax and GST credits

    As the minor benefit exemption applies the employer could not claim an income tax deduction or GST credits for food or drink provided.

    Clients – no FBT

    There is no FBT on benefits provided to clients.

    Income tax and GST credits

    The employer could not claim an income tax deduction or GST credits for food or drink provided to the clients.

    End of example

     

    Example 6 – Business planning day

    A planning day where food and drink are provided in connection to the day's activities: cost is $125 per head

    An insurance company organises a planning day for their managers at a conference centre. Morning and afternoon tea and a three course lunch (excluding alcohol) will be provided to the managers during the course of the day.

    Entertainment is not being provided

    Providing light meals is not considered entertainment. Although the lunch provided in this situation is work-related, the three course meal would be elaborate and therefore considered to be entertainment.

    Employees – exemption applies

    The exemption for food and drink provided and consumed on the employer's premises on a work day will not apply in this situation to the lunch as it has been provided off the employer's premises. However, the minor benefit exemption applies as the cost of the activity is less than $300 per employee and, considering the other factors, it would be unreasonable to treat the benefit as a fringe benefit.

    Income tax and GST credits

    As the minor benefit exemption applies the employer could not claim an income tax deduction or GST credits for food or drink provided.

    End of example

    Step 5 – Record keeping

    You should record information relating to the entertainment provided so that the taxable value of the fringe benefit can be calculated. You should record:

    • the date you provided the entertainment
    • who is the recipient of the entertainment (are they an employee, associate of the employee or another person)
    • the cost of the entertainment
    • the kind of entertainment provided
    • where the entertainment is provided.

    Step 6 – Reporting on employees' payment summaries

    If you provide fringe benefits with a total taxable value of more than $2,000 to an employee in an FBT year, you must report the grossed-up taxable value of the fringe benefits on the employee's payment summary for the corresponding income year (1 July to 30 June).

    Recreation must be reported on your employee's payment summary.

    However, the following fringe benefits are excluded from the reporting requirements. Although they are excluded from the reporting requirements, you still need to pay FBT on them:

    • entertainment by way of food and drink, and benefits associated with that entertainment, such as travel and accommodation
    • hiring or leasing entertainment facilities such as corporate boxes.

    If these benefits are provided under a salary packaging arrangement on or after 1 April 2016, they are not excluded from the reporting requirements.

    Note that exempt benefits are not fringe benefits. They are not reportable on your employee's payment summary.

      Last modified: 08 Jul 2019QC 19919