Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012523644722

Ruling

Subject: Fringe benefits classification and income tax deductibility

Question 1

Is the event a seminar for the purposes of section 32-65 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

Question 2

Answer

Question 3

Answer

Question 4

Answer

Question 5

Answer

Question 6

Answer

Question 7

Answer

Question 8

Answer

Question 9

Answer

Question 10

Answer

Question 11

Answer

Question 12

Answer

Question 13

Answer

Question 14

Answer

Question 15

Answer

Question 16

Answer

Question 17

Answer

This ruling applies for the following periods:

A number of fringe benefits tax years commencing in the relevant fringe benefits tax year.

The scheme commences on:

In the relevant fringe benefits tax year

Relevant facts and circumstances

You require your top performing staff to attend a training seminar at a location that is not their usual place of employment.

A small number of representatives from key clients also attended the event.

None of the clients are a related party to you.

Each of the client representatives are Australian employees.

The main purpose of the event was to provide training to staff directly relevant to their work, provide staff with the opportunity to meet with key representatives of key clients and build relationships with them.

The training was directly relevant to your business.

The employees who attended the training were required to share the knowledge obtained with their colleagues upon their return to work.

You incurred all of the costs relating to both your employees and your clients representatives attending the seminar.

The event was held over a number of days with the first and last day primarily comprising of travelling to and from the location.

You did not make an election under section 37AA of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to apply Division 9A of the FBTAA in determining the taxable value of any meal entertainment fringe benefits that may have been provided in the fringe benefits tax (FBT) year.

Over the course of the event you provided your employees and the client representatives with:

You also provided your employees with:

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 37AD

Fringe Benefits Tax Assessment Act 1986 Division 9A

Fringe Benefits Tax Assessment Act 1986 section 40

Fringe Benefits Tax Assessment Act 1986 section 44

Fringe Benefits Tax Assessment Act 1986 section 45

Fringe Benefits Tax Assessment Act 1986 section 52

Fringe Benefits Tax Assessment Act 1986 section 58P

Fringe Benefits Tax Assessment Act 1986 paragraph 58P(1)(f)

Fringe Benefits Tax Assessment Act 1986 section 66

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 section 152B

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 32-5

Income Tax Assessment Act 1997 section 32-10

Income Tax Assessment Act 1997 section 32-20

Income Tax Assessment Act 1997 section 32-35

Income Tax Assessment Act 1997 section 32-65

Income Tax Assessment Act 1997 subsection 32-65(2)

Income Tax Assessment Act 1997 section 995-1(1)

Reasons for decision

Question 1

Summary

Detailed reasoning

Is the event a seminar for the purposes of section 32-65 of the Income Tax Assessment Act 1997 (ITAA 1997)?

The event was held over a number of days.

Section 32-5 of the ITAA 1997 generally disallows a deduction for entertainment expenses:

SECTION 32-5 No deduction for entertainment expenses

The main exception to the rule contained in section 32-5 is found in section 32-20 which states that section 32-5 does not prevent a deduction to the extent that the entertainment is provided by way of providing a fringe benefit.

Section 32-35 provides another exception to the general rule of section 32-5 by allowing a deduction for food, drink accommodation or travel that is reasonably incidental to an employee attending a seminar that goes for at least four hours. Section 32-35 states:

SECTION 32-35 Seminar expenses

Section 32-65 of the ITAA 1997 a definition of the term 'seminar' for the purposes of section 32-35. Section 32-65 states:

SECTION 32-65 Seminars (seminar expenses table item 2.1)

In summarising, for a seminar to be considered to be a 'seminar' for the purposes of section 32-65 of the ITAA 1997 the following requirements must be met:

The terms conference, convention, lecture, meeting, speech, question and answer session and educational course are not defined in the ITAA1997 and so take on their ordinary meanings.

The term conference is defined in The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 (Macquarie Dictionary), as:

conference

Noun 1. a meeting for consultation or discussion.

'Meeting' is also defined in the Macquarie Dictionary as follows:

meeting

noun 1. a coming together.

The whole of the event meets the Macquarie Dictionary definition of a conference and individual parts of the training session on day two are more specifically a lecture and question and answer session.

On one of the days you held a specific training session. You have provided that this individual training session went for at least four hours for the purposes of the definition of seminar contained in section 32-65 of the ITAA 1997. That is, that training session went for at least four hours not including any part that occurred during a meal or any break for the purposes of a meal, rest or recreation. As that individual session individually met the requirements of subsection 32-65(2), the whole of the seminar event meets the requirements of subsection 32-65(2).

In conclusion, the event is considered to be a seminar for the purposes of section 32-65 of the ITAA 1997.

Question 2

Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides the following definition of a 'fringe benefit':

When you provided the return airfares and transfers to your employees to enable them to attend the conference you provided your employees with a fringe benefit.

In order to determine whether you will have a fringe benefits tax liability arising from the provision of the return airfares and transfers it is necessary to initially consider the type of fringe benefit that is provided. The FBTAA is divided into 13 types of benefits and each type has its own valuation rules.

Section 45 of the FBTAA defines residual benefits as:

The provision of the airfares and transfers are a benefit that does not fall within one of the specific categories of benefits in Subdivision A of Divisions 2 to 11 of the FBTAA and therefore, according to section 45 of the FBTAA, the provision of the return airfares and transfers constitutes a residual benefit.

The taxable value of a residual fringe benefit can be reduced in certain circumstances by the use of the otherwise deductible rule contained in section 52 of the FBTAA.

Section 52 of the FBTAA states:

52 Reduction of taxable value - otherwise deductible rule

(1) Where:

exceeds nil; and

…

TV - ND

Taxation Ruling TR 2001/2 Fringe benefits tax: the operation of the new fringe benefits tax gross-up formula to apply from 1 April 2000 (TR 2001/2) summaries the operation of the otherwise deductible rule. TR 2001/2 states:

Therefore, in order to determine whether you will have a fringe benefits tax liability in relation to the return airfares and transfers it must be determined whether your employees would have been entitled to claim an income tax deduction for the costs of the return airfares and transfers had the employee incurred the expense themselves.

Would your employees have been entitled to claim a once only deduction for the costs of the return airfares and transfers had they incurred the expense themselves?

The ITAA 1997 stipulates in what circumstances an individual can claim an income tax deduction in their individual tax return for a relevant work related expense. The general rules about deductions are found in section 8-1 of the ITAA 1997 as follows:

8-1 General deductions

In summarising, to deduct an amount for a loss or outgoing under section 8-1 of the ITAA 1997 one of the following requirements must be met:

In addition, subsection 8-1(2) prescribes that a deduction will not be allowed as a general deduction if any of the following exists:

Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business (TR 98/9) clarifies the circumstances in which self education expenses are allowable as deductions to individuals under the Income Tax Assessment Act 1997 (ITAA 1997). TR 98/9 states:

Circumstances in which self-education expenses are allowable

Section 8-1 of the ITAA 1997

The costs of the return airfares and transfers were incurred to enable your employees to attend the seminar. Section 8-1 of the ITAA 1997 allows a deduction 'to the extent that' the loss or outgoing is incurred in gaining or producing assessable income and disallows a deduction 'to the extent that' the expenditure is private or domestic in nature. Further, section 32-5 of the ITAA 1997 specifically disallows a deduction for entertainment expenses. Section 32-5 states:

Section 32-10 of the ITAA 1997 defines the term 'entertainment':

32-10(1) Entertainment means:

It is therefore necessary to consider in the context of section 8-1 of the ITAA 1997, whether the whole expenditure on the airfares and accommodation would be deductible to the employer, or whether only part of the expenditure would be deductible as a portion relates to entertainment or some private purpose.

TR 95/10 discusses the potential requirement to apportion expenses:

The case of FC of T v Amway of Australia Ltd FCFCA 273; 2004 ATC 4893 (Amway) provides assistance in determining the dominant purpose in incurring the costs of airfares and transfers in order to attend the event.

Amway concerned the deductibility of certain expenses incurred by Amway in relation to annual Australian Leadership Seminars (ALS) seminars that it held for its distributors. The case considered sections 51(1) and 51AE of the Income Tax Assessment Act 1936 (ITAA 1936) which have since been replaced by Divisions 8-1 and 32 of the ITAA 1997 and therefore the principles determined in the case are still of assistance. Attendance at the seminars was by invitation only and the seminars were held at holiday destinations, mostly overseas. The attendees' travelled and stayed at Amway's expense. They participated in a number of business sessions and as well as recreational activities and gala dinners. In order to determine the deductibility of the costs incurred in hosting the seminars the Court was required to determine the purpose of the seminar. The Court held that the costs of the airfares and accommodation were expended to bring the attendees to a seminar, not in order to provide them with food, drink and recreation. Therefore the travel and accommodation costs were held not to have been incurred for the purpose of facilitating entertainment, provided by way of food, drink and recreation and were fully deductible to Amway.

In discussing the findings and conclusions of fact drawn by the Primary Judge, Hill, Sundberg and Kenny JJ stated:

Your seminar has a similar character to the ALS in Amway. The seminar has a serious business purpose for you by providing relevant training to staff which they were expected to share with their colleagues upon their return to work and, to provide the staff with the opportunity to meet and build relationships with representatives of your clients. Therefore, following the Amway decision, we conclude that the principal purpose of the seminar is a business purpose with other significant ancillary purposes. Accordingly, the cost of the airfares and transfers was a cost expended to bring your employees to the seminar, not in order to provide them with food, drink and recreation. Therefore, had the employees incurred the expenditure themselves they would have been entitled to a deduction for the whole amount.

Conclusion

The provision of the airfares and transfers to your employees is a residual fringe benefit. Had the employees incurred the expense themselves they would have been entitled to a once only deduction for the cost and therefore under the otherwise deductible rule contained in section 52 of the FBTAA the taxable value of the residual fringe benefit will be reduced to nil and you will therefore not have a fringe benefits tax liability in relation to the provision of the airfares and transfers to your employees.

Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides the following definition of a 'fringe benefit':

in respect of the employment of the employee, but does not include:

Subsection 136(1) defines 'employee' as:

Definitions of current, former and future employees are also provided in subsection 136(1):

Section 66 of the FBTAA also sets out the tax obligations in respect of FBT:

Chapter 1 of Fringe benefits tax - a guide for employers (NAT 1054) (FBT guide for employers), summaries:

1.2 Who pays the tax?

FBT is paid by you, as the employer.

In summary, you will only have an FBT liability for benefits provided to your employees or to an associate of your employee, whether the benefit is provided by you, an associate of yours or by an arranger. The clients are not your employees for the purposes of the FBTAA according to the definition of 'employee' provided by subsection 136(1) of the FBTAA. Therefore, you cannot incur an FBT liability for the airfares and transfers provided to your clients.

Refer to question 2(a) above. As discussed in question 2(a), section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing to the extent that:

Subsection 8-1(2) disallows a deduction to the extent that the expense is:

The cost of providing the return airfares and transfers to your employees is an outgoing incurred in carrying on a business for the purpose of gaining or producing assessable income and is not prevented from being a deduction for any of the reasons contained in subsection 8-1(2) of the ITAA 1997. Therefore the costs incurred in providing the return airfares and transfers to your employees are deductible under section 8-1 of the ITAA 1997.

You incur the costs of the return airfares and transfers for your clients in order to bring the clients to the seminar to train your employees.

Refer to the reasoning in question 2(c) above. The same reasoning can be applied to conclude that you are entitled to claim an income tax deduction under section 8-1 of the ITAA 1997 for the costs of the return airfares and transfers provided to the clients.

Question 3

Refer to question 2(a) above.

The same reasoning can be applied to conclude that the provision of the accommodation to your employees is a residual fringe benefit and the taxable value of the benefit can be reduced to nil in accordance with the otherwise deductible rule in section 52 of the FBTAA. Therefore, you will not incur a FBT liability for the accommodation provided to your employees.

Refer to question 2(b) above.

The same reasoning can be applied to conclude that the provision of the accommodation to your clients will not result in a FBT liability for you as your clients are not you employees as required by subsection 136(1) of the FBTAA.

(c) Can you claim an income tax deduction in relation to the accommodation provided to your employees?

Refer to question 2(c) above.

The same reasoning can be applied to conclude that the cost of providing the accommodation to your employees is an outgoing incurred in carrying on a business for the purpose of gaining or producing assessable income and is not prevented from being a deduction for any of the reasons contained in subsection 8-1(2) of the ITAA 1997. Therefore the costs incurred in providing the accommodation to your employees are deductible under section 8-1 of the ITAA 1997.

(d) Can you claim an income tax deduction in relation to the accommodation provided to your clients?

Refer to question 2(d) above.

The same reasoning can be applied to conclude that you incurred the cost of providing the accommodation to your clients in order to bring your clients to the seminar to train your employees and therefore you are entitled to claim an income tax deduction for these costs in accordance with section 8-1 of the ITAA 1997.

Question 4

(a) Will you incur a fringe benefits tax liability for the breakfasts provided to your employees?

You provide breakfasts to your employees in conjunction with the accommodation.

Refer to the discussion at question 2(a) above. The provision of the breakfasts to your employees is a fringe benefit in accordance with the definition provided by subsection 136(1) of the FBTAA.

The most relevant types of benefit in relation to the provision of the breakfasts are:

Section 37AD of the FBTAA provides a definition of 'meal entertainment':

37AD Meaning of provision of meal entertainment

Paragraph 14.3 in chapter 14 of FBT Guide for employers provides guidance on how to identify whether the provision of food or drink is entertainment:

Taxation Ruling TR 97/17 Income Tax and fringe benefits tax: entertainment by way of food or drink (TR 97/17) discusses the concept of what is entertainment as it relates to the provision of food or drink for the purposes of the FBTAA and the ITAA 1997. Relevantly, TR 97/17 provides:

In relation to meals provided to an employee who is travelling in the course of their employment, TR 97/17 states:

Your employees were travelling in the course of their employment in order to attend the seminar. In accordance with TR 97/17 the provision of the breakfasts to your employees does not constitute entertainment by way of food or drink for the purposes of paragraph 37AD(a) of the FBTAA. The breakfasts also do not meet the character of paragraph 37AD(b) or 37AD(c). As such, the provision of the breakfasts to your employees does not constitute the provision of meal entertainment defined in section 37AD of the FBTAA and therefore cannot be classified as meal entertainment fringe benefits.

The other relevant category of benefit is property fringe benefits. Section 40 of the FBTAA sets out the criteria for a benefit to be considered a property benefit:

40 Property benefits

When you provide your employees with breakfast, you are a provider proving them with property. Therefore the provision of the breakfasts to your employees will be a property fringe benefit in accordance with Division 11 of the FBTAA.

The taxable value of a property fringe benefit can be reduced in certain circumstances by the otherwise deductible rule provided for in section 44 of the FBTAA:

44 Reduction of taxable value - otherwise deductible rule

(1) Where:

TV - ND

…

In summary, the taxable value of property fringe benefits can be reduced to the extent that the employee would have been able to claim an income tax deduction had the employee themselves incurred the expense.

Would your employees have been entitled to claim a once only deduction for the cost of the breakfasts had they incurred the expense themselves?

As previously discussed, section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing that is incurred in the gaining or producing of assessable income or that is necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income. However section 8-1 disallows a deduction to the extent that it is capital or capital in nature, private or domestic in nature, used to produce exempt income or non assessable non-exempt income or prevented from being deducted by a provision of the ITAA 1997 or the ITAA 1936.

As referenced in question 2(a) above TR 98/9 and TR 95/10 provide that when an employee is travelling in the course of their employment to attend a seminar or conference, the costs incurred in attending the conference or seminar such as meals, are deductible as a necessary cost of participating in the conference or seminar.

ATO Interpretative Decision ATO ID 2002/807 Income Tax Deductions: meal expenses whilst on overnight business travel (ATO ID 2002/807) confirms the deductibility for meal expenses when an employee is travelling overnight on business:

Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits (MT 2030) further clarifies:

As discussed at question 1, section 32-5 of the ITAA 1997 specifically prevents a deduction for entertainment expenses. It has been concluded above that the breakfasts do not amount to meal entertainment for the purposes of section 37AD of the FBTAA. The classification of a benefit as meal entertainment in accordance with section 37AD of the FBTAA is consistent with the definition of entertainment in section 32-10 of the ITAA 1997. Therefore the breakfasts would not be considered to be entertainment for the purposes of section 32-10 and a deduction is not specifically prevented by section 32-5 of the ITAA 1997.

Therefore, your employees would have been entitled to claim a deduction for the whole cost of the breakfasts under section 8-1 of the ITAA 1997 had they incurred the expenditure themselves.

Conclusion

The provision of the breakfasts to your employees does not amount to meal entertainment and is a property fringe benefit. Had the employees incurred the expense themselves they would have been entitled to a once only deduction for the cost and therefore in accordance with the otherwise deductible rule contained in section 44 of the FBTAA, the taxable value of the property fringe benefit will be reduced to nil. You will therefore not have a fringe benefits tax liability in relation to the provision of the breakfasts to your employees.

(b) Will you incur a fringe benefits tax liability for the breakfasts provided to your clients?

Refer to question 2(b) above.

The same reasoning can be applied to conclude that as your clients are not your employees for the purposes of the FBTAA you will not incur a FBT liability for the breakfasts provided to your clients.

(c) Can you claim an income tax deduction in relation to the breakfasts provided to your employees?

Refer to question 2(c) above. The cost of providing the breakfasts to your employees is an outgoing incurred in carrying on a business for the purpose of gaining or producing assessable income. It has been concluded that the breakfasts do not amount to the provision of meal entertainment and therefore, section 32-5 of the ITAA 1997 does not operate to prevent a deduction for the expenditure. None of the other reasons for denying a deduction contained in contained in subsection 8-1(2) of the ITAA 1997 operate to deny a deduction. Therefore, the costs incurred in providing the breakfasts to your employees are deductible under section 8-1 of the ITAA 1997. TR 97/17 confirms:

Result of providing food or drink other than meal entertainment

(d) Can you claim an income tax deduction in relation to the breakfasts provided to your clients?

Refer to question 2(d) above.

The same reasoning can be applied to conclude that the cost of the breakfasts provided to your clients are incurred in carrying on a business for the purpose of gaining or producing assessable income as you incur the costs of the breakfasts provided to your clients in order for them to attend the overseas seminar to train your employees. None of the reasons for denying a deduction set out in subsection 8-1(2) of the ITAA 1997 apply. The costs are therefore deductible under section 8-1 of the ITAA 1997.

Question 5

(a) Will you incur a fringe benefits tax liability for the gifts provided to your employees?

Over the course of the event you provided a number of gifts to the attendees.

Refer to the reasoning at question 2(a) above. Each of the gifts to your employees is a fringe benefit in accordance with the definition provided by subsection 136(1) of the FBTAA. Each gift constitutes a separate fringe benefit.

The most relevant type of benefit in relation to the gifts is the property benefit category provided for in Division 11 of the FBTAA.

Refer to question 4 above. The same reasoning can be applied to conclude that the provision of the gifts each constitutes a property benefit.

Question 4(a) above, also explains the manner in which the taxable value of a property benefit can be reduced by the use of the otherwise deductible rule contained in section 44 of the FBTAA. That is, the taxable value of a property benefit may be reduced to the extent that the employee would have been able to claim an income tax deduction had the employee themselves incurred the expense.

Would your employees have been entitles to claim a once only deduction for the cost of the gifts had they incurred the expense themselves?

Refer to question 2(a) above.

Section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing that is incurred in the gaining or producing of assessable income or that is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, section 8-1 disallows a deduction to the extent that the expense is capital or capital in nature, private or domestic in nature, used to produce exempt income or non-assessable non-exempt income or prevented from being deducted by a provision of the ITAA 1997 or the ITAA 1936.

Generally expenditure on clothing or accessories would not be considered to have been incurred in gaining or producing assessable income and is considered to be expenditure of a private or domestic nature. Taxation Ruling TR 97/12 Income Tax and fringe benefit tax: work related expenses: deductibility of expenses on clothing, uniform and footwear (TR 97/12) states:

Considering the requirements of section 8-1 of the ITAA 1997 and the guidance provided by TR 97/12, it is concluded that had your employees incurred the cost for the gifts they would not have been entitled to an income tax deduction for any of the cost.

Therefore, the taxable value of the property benefits arising from the provision of each of the gifts can not be reduced by the otherwise deductible rule.

In order to determine whether you will incur an FBT liability for the provision of any of the gifts it must be determined whether any exemptions apply. Section 58P of the FBTAA exempts in certain circumstances benefits that are considered to be 'minor'. Section 58P states:

58P Exempt benefits - minor benefits

Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits (TR 2007/12) summarises the requirements of section 58P:

In summarising, a benefit is an exempt benefit under section 58P of the FBTAA if:

1. Is the notional taxable value of the benefit less than $300?

Paragraphs 176 to 186 of TR 2007/12 discuss this requirement:

The benefits in question are not specifically excluded from being a minor benefit according to the criteria discussed at paragraphs 159 to 175 of TR 2007/12. The gifts all have a notional taxable value of less than $300 in accordance with the definition provided by subsection 136(1) of the FBTAA.

Paragraph 58P(1)(f) of the FBTAA sets out five criteria to be considered when deciding if it would be unreasonable to treat the minor benefit as a fringe benefit. Chapter 20 - Exempt benefits of FBT Guide for employers summarises these five criteria as follows:

Subsection 58P (2) of the ITAA sets out what is considered to be an associated benefit of a minor benefit for the purposes of considering the criteria above. Subsection 58P(2) states:

In considering the requirements of paragraph 58P(1)(f) of the FBTAA, the following factors lead to a conclusion it would not be unreasonable to treat the gifts as a fringe benefit and therefore that the provision of each of the items will not be exempt as a minor benefit:

Conclusion

In summarising, each of the gifts is a property benefit whose taxable value cannot be reduced by the operation of the otherwise deductible rule. Applying the requirements of subsection 58P(1), the benefits are not considered to be minor benefits and are therefore not exempt benefits. The benefits meet the definition of a fringe benefit in accordance with subsection 136(1) of the FBTAA and therefore you will incur an FBT liability in relation to the provision of each of the gifts to each of your employees.

(b) Will you incur a fringe benefits tax liability for the gifts provided to your clients?

Refer to question 2(b) above.

The same reasoning can be applied to conclude that the provision of any of the gifts to your clients will not result in an FBT liability for you as your clients are not your employees as required by subdivision 136(1) of the FBTAA.

(c) Can you claim an income tax deduction in relation to the gifts provided to your employees?

Refer to question 2(c) above.

Section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing to the extent that the loss or outgoing is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income but disallows a deduction to the extent that the expense is capital or capital in nature, private or domestic in nature, used to produce exempt income or non assessable non-exempt income or is prevented from being deducted by a provision of the ITAA 1997 or the ITAA 1936.

As concluded above, the gifts provided to your employees all constitute the provision of a fringe benefit. The costs incurred in providing a fringe benefit to your employee are deductible under subsection 8-1(1) of the ITAA1997. Regardless of whether the provision of the gifts constitutes entertainment a deduction would still be allowed as section 32-20 of the ITAA 1997 operates to allow a deduction for the provision of entertainment where the loss or outgoing is incurred in respect of providing entertainment by way of providing a fringe benefit. None of the other reasons to disallow a deduction described in subsection 8-1(2) of the ITAA 1997 are relevant in this instance and therefore you are entitled to claim a deduction in relation to the gifts provided to your employees.

Refer to the discussions regarding general deductibility under section 8-1 of the ITAA 1997 in question 2 above.

As previously discussed subsection 8-1(1) allows a deduction for a loss or outgoing to the extent that:

ATO Interpretative Decision ATOID 2004/427 Income Tax Deductions: gifts to clients (ATO ID 2004/427) provides guidance in this scenario:

The circumstances in which the gifts were provided to your clients are analogous with the principles discussed in ATO ID 2004/427. The purpose in providing the gifts to your clients was dictated by the business ends to which the expenditure was directed.

The expenditure on the gifts was, in the circumstances, necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income and the requirements of subsection 8-1(1) are satisfied.

Subsection 8-1(2) of the ITAA 1997 disallows a deduction to the extent that the expense is:

Refer to question 1. Section 32-5 of the ITAA 1997 specifically denies a deduction for entertainment expenses.

Guidance as to whether the provision of an item of property constitutes entertainment is provided by Taxation Determination TD 94/55 Income tax: when does providing an item of property constitute the provision of entertainment within the meaning of subsection 32-10(1) of the Income Tax Assessment Act 1997 (TD 94/55). TD 94/55 states:

Considering the characteristics and examples discussed in TD 94/55 it is concluded that the gifts provided to your clients align with the items described in example 1 and that the giving of these items does not constitute the provision of entertainment. Therefore, section 32-5 of the ITAA 1997 does not operate to prevent the deductibility for the costs incurred in providing the gifts to your clients.

None of the other reasons listed in subsection 8-1(2) of the ITAA 1997 work to prevent a deduction for the costs incurred in providing the items of property to your clients and therefore, you are entitled to deduct the costs incurred under section 8-1 of the ITAA 1997.

Question 6

You have provided that there was no additional element of entertainment to the dinner and after dinner drinks provided on the arrival day.

Refer to the reasoning discussed at question 4(a) above.

The same reasoning can be applied to conclude that the welcome dinner and after dinner drinks does not constitute the provision of meal entertainment. There is a difference between the dinner on day one compared with the breakfasts discussed in question 4 and that is, the provision of alcohol. Regarding the provision of alcohol and defining the dinner and after dinner drinks as meal entertainment TR 97/17 states:

Therefore the provision of alcohol will not change the classification of the dinner. Following the same reasoning applied in question 4(a) above, the dinner will not amount to meal entertainment but will be a property fringe benefit, the taxable value of which can be reduced to nil by the use of the otherwise deductible rule in section 44 of the FBTAA. You will therefore not have a fringe benefits tax liability in relation to the provision of the dinner and after dinner drinks on the arrival day.

Refer to the reasoning at question 2(b) above.

The same reasoning can be applied to conclude that as your clients are not your employees for the purposes of the FBTAA you will not incur a FBT liability for the dinner provided to your clients.

Refer to question 2(c) above. The cost of providing the dinner and after dinner drinks on the arrival day to your employees is an outgoing incurred in carrying on a business for the purpose of gaining or producing assessable income and is not prevented from being a deduction for any of the reasons contained in subsection 8-1(2) of the ITAA 1997. Therefore, the costs incurred in providing the arrival dinner to your employees are deductible under section 8-1 of the ITAA 1997.

Refer to question 2(d) above.

The same reasoning can be applied to conclude that the cost of the dinner on the arrival day, provided to your clients are incurred in carrying on a business for the purpose of gaining or producing assessable income as you incur the costs in order for your clients to attend the overseas seminar to train your employees.

Question 7

Over the course of the event you provide the employees with food and drink at gala dinners where entertainment was provided with the meal.

Given the similar nature of the gala dinners, for the purposes of determining whether each is a fringe benefit and, if necessary, classifying the type of benefit, they can be dealt with together.

Refer to the discussion at question 2(a) above. The provision of the gala dinners meets the definition of fringe benefit provided by subsection 136(1) of the FBTAA.

The most relevant types of benefit in relation to each of the gala dinners are:

Refer to the discussion of the provision of meal entertainment at question 4(a) above.

Considering the guidance discussed at question 4(a) above, the provision of the gala dinners each constitute the provision of meal entertainment.

You have advised that you did not elect to value any meal entertainment in accordance with Division 9A of the FBTAA. Therefore you must calculate the taxable value of the benefit in accordance with the valuation rules for the applicable category of benefit.

The applicable category of benefit is therefore a property fringe benefit.

Refer to the discussion at question 4(a) above. The taxable value of a property fringe benefit can be reduced by the otherwise deductible rule contained in section 44 of the FBTAA.

As discussed in question 4(a) above, section 32-5 of the ITAA 1997 prevents a deduction for entertainment expenses. The dinners constitute the provision of entertainment as the definition of 'entertainment' provided by section 32-5 of the ITAA 1997 is shared by the definition provided in Division 9A of the FBTAA.

Therefore you cannot reduce the taxable value of the benefits cannot be reduced by the otherwise deductible rule.

In order to determine whether you will incur an FBT liability in relation to each of the gala dinners it must be determined whether any exemptions apply. The minor benefits exemption contained in section 58P is the only exemption that may apply to the provision of these benefits.

Refer to question 5. The same reasoning can be applied to conclude that it would not be unreasonable to treat each of the gala dinners as a fringe benefit and that therefore the provision of each of the dinners will not be exempt as a minor benefit.

In summarising, each of the gala dinners constitutes the provision of meal entertainment and will be valued as a property benefit where the taxable value cannot be reduced by the use of the otherwise deductible rule. The benefits are not considered to be minor benefits and are therefore not exempt benefits. The benefits meet the definition of a fringe benefit in accordance with subsection 136(1) of the FBTAA and therefore you will incur an FBT liability in relation to the provision of each of the themed dinners and after dinner drinks.

Refer to question 2(b) above.

The same reasoning can be applied to conclude that as your clients are not your employees for the purposes of the FBTAA you will not incur a FBT liability for the gala dinners provided to your clients on days two, three and four.

Refer to the discussion at question 7(a) above. It has been concluded that the provision of the gala dinners constitutes the provision of meal entertainment but due to no election being made under Division 9A of the FBTAA the benefits are classified as property benefits and their taxable value cannot be reduced by the otherwise deductible rule. It has also been concluded that the benefits are not minor benefits and will therefore have a taxable value.

The provision of a fringe benefit is a loss or outgoing necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income and meets the requirements of subsection 8-1(1) of the ITAA 1997. As previously discussed subsection 8-1(2) of the ITAA disallows a deduction to the extent that the expense is prevented from being deducted by a provision of the ITAA 1997 or the ITAA 1936. Section 32-5 of the ITAA 19997 disallows a deduction for entertainment expenses but with some exceptions. The gala dinners constitute the provision of entertainment for these purposes and would normally be prevented from being deducted by section 32-5 unless one of the exceptions apply.

Section 32-20 sets out the main exception:

Section 32-20 The main exception - fringe benefits

The gala dinners constitute the provision of entertainment by way of providing a fringe benefit. Section 32-20 of the ITAA 1997 applies to ensure that a deduction for the expenditure is not prevented by section 32-5 of the ITAA 1997.

None of the other reasons for denying deductibility listed in subsection 8-1(2) of the ITAA 1997 are applicable to prevent the deductibility of the expense.

Therefore you are entitled to deduct the expense incurred in providing the fringe benefits consisting of the gala dinners under section 8-1 of the ITAA 1997.

Refer to the discussion at question 7(c) above. As discussed section 32-5 of the ITAA 1997 generally acts to disallow a deduction under section 8-1 of the ITAA 1997 when the loss or outgoing is incurred in respect of providing entertainment. As discussed above, the main exception to this rule set out in section 32-20 of the ITAA 1997 is where you incur the expense in respect of providing entertainment by way of providing a fringe benefit.

Subsection 995-1(1) of the ITAA 1997 sets out when you will be considered to be 'providing a fringe benefit'. Subsection 995-1(1) states:

As discussed in question 2(b) above, subsection 136(1) provides the following definition of a fringe benefit:

'Arrangement' is also defined by subsection 136(1) of the FBTAA:

arrangement means:

In summarising, an employee can be provided with a fringe benefit by either

These provisions work together to allow you to be taken to have provided a fringe benefit to a person who is not your employee, for the purposes of the exception contained in section 32-20 of the ITAA 1997 in certain circumstances.

TR 97/17 clarifies:

Your clients provided representatives of their businesses to you to attend the event in order to provide training to your staff and to build relationships between your staff and your clients. As previously discussed, the main purpose of the event was to provide training to staff and to provide staff with the opportunity to meet with representatives of your clients and build relationships with them.

Considering the definition of a fringe benefit contained in subsection 136(1) of the FBTAA, it is considered that the gala dinners provided to your clients constitute a fringe benefit. Your clients were provided with the dinners in respect of their employment. The employers of your clients did not provide the benefit to their employees, however as per the definition of fringe benefit, a fringe benefit can be provider to an employee by an associate of an employer or an 'arranger'.

The situation that occurred in your case falls within the subsection 136(1) definition of 'arrangement'. Therefore you, acting as an 'arranger', provided your clients' employees (your clients) with a fringe benefit.

Refer to question 7(c) above. The same reasoning can therefore be applied to conclude that you are therefore entitled to deduct the costs incurred in providing the benefit to your clients under section 8-1 of the ITAA 1997. Section 32-20 of the ITAA 1997 works to ensure that a deduction for the expenditure is not prevented by section 32-5 of the ITAA 1997 and none of the other reasons for denying deductibility listed in subsection 8-1(2) of the ITAA 1997 are applicable to prevent the deductibility of the expense.

Question 8

As previously discussed, subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides the following definition of a 'fringe benefit':

Subsection 136(1) also provides a definition of the term 'benefit' in this context:

In incurring the costs of the room hire and room set up for the training seminar for your employees you are not providing them with a benefit for the purposes of the FBTAA and therefore you will not incur an FBT liability in relation to the room hire and room set up for the training session.

Refer to the reasoning at question 2(b) above.

The same reasoning can be applied to conclude that as your clients are not your employees for the purposes of the FBTAA you will not incur a FBT liability for the room hire and room setup provided to your clients.

The costs incurred in relation to the room hire and room set up for the training session were expended in order for your clients to provide training to your employees at the training session.

Refer to the reasoning at question 2(c) and 2(d) above. The same reasoning can be applied to conclude that the costs incurred in relation to the room hire and room set up in relation to your employees' attendance at the training session, are deductible expenses under section 8-1 of the ITAA 1997. The costs are expended to enable your employees to receive the training provided at the training session and are considered to be an outgoing incurred in carrying on a business for the purpose of gaining or producing assessable income and are not prevented from being a deduction for any of the reasons contained in subsection 8-1(2) of the ITAA 1997. Therefore the costs are deductible under section 8-1 of the ITAA 1997.

Question 9

Refer to question 4(a) above. The provision of the morning tea and lunch to your employees on day two is a fringe benefit in accordance with the definition provided by subsection 136(1) of the FBTAA.

As was the case with the breakfasts considered in question 4(a), the most relevant types of benefit in relation to the provision of the morning tea and lunch to your employees are:

As discussed in question 4(a), TR 97/17 sets out the four relevant factors that should be considered in determining whether the provision of food or drink constitutes entertainment - why, what, when and where. At paragraph 23 TR 97/17 states that food or drink provided for the purpose of refreshment, during work time or while an employee is travelling on work is less likely to have the character of entertainment. Further, morning and afternoon teas and light meals are generally not considered to constitute entertainment. Considering the four factors and the examples provided by TR 97/17 the morning tea and light lunch provided would not constitute entertainment.

Applying the same reasoning as applied in question 4(a) above, the provision of food and drink in the form of the morning tea and light lunch will be a property benefit in accordance with section 40 of the FBTAA, the taxable value of which can be reduced by the use of the otherwise deductible rule contained in section 44 of the FBTAA. Therefore you will not have a fringe benefits tax liability in relation to the provision of the morning tea and lunch provided to your employees on day two.

Refer to question 2(b) above. The same reasoning can be applied to conclude that, as your clients are not your employees for the purposes of the FBTAA you will not incur a FBT liability for the morning tea and lunch provided to your clients.

Refer to question 4(c) above. The same reasoning can be applied to conclude that the costs incurred in providing the morning tea and lunch to your employees is deductible under section 8-1 of the ITAA 1997.

Refer to question 4(d) above. The same reasoning can be applied to conclude that the costs of the morning tea and lunch provided to your clients on day two are therefore deductible under section 8-1 of the ITAA 1997.

Question 10

You provide your employees with the opportunity to participate in various recreational activities at the event.

The provision of these activities is a fringe benefit within the meaning provided by subsection 136(1) of the FBTAA.

The FBTAA states that 'entertainment' has the meaning given by section 32-10 of the ITAA 1997. As previously discussed the ITAA 1997 states that entertainment includes entertainment by way of recreation. Recreation is a defined term in the ITAA 1997 and the definition provided by section 995-1 is:

recreation includes amusement, sport of similar leisure-time pursuits.

The recreational activities are considered to be entertainment by way of recreation for the purposes of the FBTAA.

There is no specific category of fringe benefit for the provision of entertainment. The FBT guide for employers provides guidance in classifying and calculating the taxable value for benefits that are recreational entertainment:

Recreational entertainment includes amusement, sport and similar leisure time pursuits - for example, a game of golf, theatre or movie tickets, a joy flight or a harbour cruise.

If you provide recreational entertainment to your employees, you need to:

Step

Action

Section reference

1

Consider whether an exemption applies

14.11

2

If no exemption applies, decide how you're going to value the entertainment

14.12

3

Keep the appropriate records

14.13

4

If required, report an amount on the employee's payment summary

14.14

Depending on the standard of entertainment provided, the minor benefits exemption may apply (refer to section 20.8 of Fringe benefits tax exempt benefits).

The taxable value of recreational entertainment is calculated using the respective valuation rule according to whether the benefit is an expense payment (refer to Expense payment fringe benefits), property (refer to Property fringe benefits) or residual fringe benefit (refer to Residual fringe benefits).

Where you provide recreational entertainment by hiring or leasing entertainment facilities, you may elect to use the 50-50 split method.

In summary in order to determine whether the provision of recreational entertainment will result in a FBT liability for you, you must:

1. Does an exemption apply?

The notional taxable value of some of the benefits is less than $300 and therefore the minor benefits exemption contained in section 58P of the FBTAA could potentially apply to exempt the benefits.

Refer to question 5. The same reasoning can be applied to conclude that it would not be unreasonable to treat any of the recreational activities as a fringe benefit and that therefore the provision of any of the recreational activities with a notional taxable value of less than $300 will not be exempt as a minor benefit.

None of the other exemptions in the FBTAA apply to exempt the benefit.

As stated above, the taxable value of recreational entertainment is calculated using the appropriate valuation rules depending on whether the benefit is an expense payment, property or residual fringe benefit and where you provide recreational entertainment by hiring or leasing entertainment facilities you can elect to use the 50-50 split method.

Chapter 14 of the FBT Guide for employers provides guidance on determining when you will be considered to be providing recreational entertainment by hiring or leasing entertainment facilities:

Entertainment facility leasing expenses are the expenses you incur in hiring or leasing:

…

The phrase 'other premises or facilities' has a wide meaning. In the same way that a corporate box is a part of larger premises or a facility (being the sporting stadium), items that satisfy this category of entertainment facility leasing expense must be either:

The following are examples of 'other premises or facilities' for providing entertainment:

The following would not be 'other premises or facilities' for providing entertainment:

In summary, depending on the arrangement that you entered into regrading the provision of some of the recreational entertainment events they may be entertainment facility leasing expenses or, for the same reasoning discussed in question 2(a), they will be residual benefits as defined by section 45.

If a benefit is an entertainment facility leasing expense you can elect to value the expense using the 50-50 split method contained in section 152B which will result in an FBT liability for you:

If:

If the benefits are valued as residual fringe benefits then the taxable value can potentially be reduced by the otherwise deductible rule per section 52 of the FBTAA where the employee would have been entitled to a once off income tax deduction had they incurred the expense themselves.

Would your employee have been entitled to an income tax deduction for the cost of the recreational entertainment if they incurred the expense themselves?

As established above, recreational events constitute entertainment by way of recreation for the purposes of the FBTAA and in accordance with section 32-10 of the ITAA 1997. Section 32-5 of the ITAA disallows a deduction for entertainment expenses with certain exceptions. None of the exceptions listed are applicable in this instance and therefore your employee would not have been entitled to a deduction for the cost of the recreational events had they incurred the expense themselves.

Summary

You will therefore have a FBT liability in relation to the recreational entertainment benefits provided to your employees.

Refer to the reasoning discussed at question 10(a) above. In providing each of the activities you are providing entertainment by way of recreation and the provision of these activities is a fringe benefit provided to your employees.

The costs incurred in providing a fringe benefit to your employee are deductible under subsection 8-1(1) of the ITAA1997. Section 32-20 of the ITAA 1997 operates to allow a deduction for the provision of entertainment where the loss or outgoing is incurred in respect of providing entertainment by way of providing a fringe benefit. None of the other reasons to disallow a deduction described in subsection 8-1(2) of the ITAA 1997 are relevant in this instance and therefore you are entitled to claim a deduction under section 8-1of the ITAA1997 in relation to the provision of the recreational entertainment on day three.

Question 11

Refer to question 4(a).

The same reasoning can be applied to conclude that the provision of the lunches to your employees following the recreational activities are fringe benefits. The lunches do not constitute meal entertainment. The lunches are a property fringe benefit and their taxable value can be reduced to nil by the use of the otherwise deductible rule contained in section 44 of the FBTAA as the employees are travelling in the course of their employment and for the same reasons discussed in relation to the breakfasts in question 4(a) above, the employees would have been entitled to a deduction for the cost of the lunch had they incurred the expense themselves. Therefore you will not have a fringe benefits tax liability in relation to the provision of the lunches to your employees on day three.

Refer to question 4(c).

The same reasoning can be applied to conclude that the cost of the lunches provided to your employees is an outgoing incurred in carrying on a business for the purpose of gaining or producing assessable income and is not prevented from being a deduction for any of the reasons contained in subsection 8-1(2) of the ITAA 1997. Therefore, the costs incurred in providing the lunches on day three are deductible under section 8-1 of the ITAA 1997.

Question 12

Refer to question 2(a). The provision of the lunches to your employees at the feedback seminar constitutes a fringe benefit for the purposes of subsection 136(1) of the FBTAA.

The most relevant types of benefit in relation to the lunches are;

Refer to the discussion of meal entertainment at question 4(a) above. An entertainment act performed at the lunch. Considering the relevant definitions and the guidance provided by paragraph 14.3 of the FBT Guide for employers and TR97/17, the lunch at the sales feedback session is considered to be meal entertainment.

As previously discussed, you did not elect to value any meal entertainment in accordance with the valuation rules contained in Division 9A of the FBTAA and therefore the standard valuation rules apply depending on what category of benefit the meal entertainment is.

The provision of the lunch constitutes a property fringe benefit in accordance with section 40 of the FBTAA, the taxable value of which can be reduced by the use of the otherwise deductible rule contained in section 44 of the FBTAA.

Would your employees have been entitled to a once off deduction for the cost of the lunch had they incurred the expense themselves?

Your employees are travelling in the course of their employment and as discussed at question 4 the costs of meals such as lunch are normally deductible.

However, the lunch at the feedback seminar has an element of entertainment and section 32-5 of the ITAA 1997 disallows a deduction for entertainment expenses. As concluded above the lunch is considered to be meal entertainment. As discussed above at question 1, section 32-5 of the ITAA 1997 however provides an exception to the rule in section 32-2 and allows a deduction for providing food, drink, accommodation or travel that it reasonably incidental to an individual attending a seminar that goes for at least four hours.

As concluded in question 1, the event is a seminar that goes for at least four hours in accordance with the definition provided by section 32-65.

For the exception contained in section 32-5 to apply further conditions must be satisfied. The food, drink, accommodation or travel must be reasonably incidental to the individuals attendance at the seminar and the exclusions to the exception must (32-35(a), (b) and (c)) must not apply.

The FBT Guide for employers provides guidance in determining when food and drink is considered to be reasonably incidental to an individual's attendance at a seminar. The FBT Guide for employers states at chapter 14:

What does reasonably incidental mean?

Food or drink is reasonably incidental to a seminar if it:

The lunch was provided to all seminar participants during a working session of the seminar. Considering the factors listed above, the lunch is considered to be reasonably incidental to the employees' attendance at a seminar.

Section 32-35 states that the exception provided by section 32-35 does not apply if:

Section 32-65(3) provides the following definitions that assist in interpreting these requirements:

The seminar was not organised in order for individuals to give or received information relating to the business but was organised in order to provide training to the employees on matters relevant to your business. The working sessions of the seminar was conducted on property that is occupied by a person, other than by you, whose business includes organising seminars or making property available for conducting seminars. Therefore it is considered that the seminar is not a business meeting for the purposes of section 32-35.

The seminar's main purpose was not to promote or advertise a business or prospective business, or its goods or services and as discussed at question 2 above, considering Amway, the seminar's main purpose was not to provide entertainment at, or in connection with, the seminar. Therefore section 32-35(b) and 32-35(c) do not operate to exclude the exception contained in section 32-35 from operating.

Summary

Had the employees incurred the expense themselves they would have been entitled to a once off deduction for the cost of the lunch and therefore the otherwise deductible rule operates to reduce the taxable value of the lunch to nil and you will not incur an FBT liability for the cost of providing the lunch to your employees.

(b) Will you incur a fringe benefits tax liability for the lunch provided to your clients at the feedback seminar?

Refer to question 2(b) above.

The same reasoning can be applied to conclude that the provision of the lunch provided to your clients at the feedback seminar will not result in an FBT liability for you as your clients are not your employees as required by subdivision 136(1) of the FBTAA.

You incur the costs in providing the lunch to your employees at the feedback seminar in order to provide your employees with entertainment by way of providing a fringe benefit.

Refer to question 7 above; the same reasoning can be applied to conclude that section 32-20 of the FBTAA operates to ensure that a deduction for the cost of providing the fringe benefit is not denied by the operation of section 32-5 of the ITAA 1997. None of the other exceptions listed in subsection 8-1(2) operate to deny the deductibility of the expense. Therefore you are entitled to deduct the costs incurred under section 8-1 of the ITAA 1997.

(d) Can you claim an income tax deduction in relation to the lunch provided to your clients at the feedback seminar?

Refer to the discussion at question 7 above. The same reasoning can be applied to conclude that you are entitled to a deduction for the costs of providing the lunch to your clients at the feedback seminar

Question 13

The coach transfers and boat charter are entertainment for both the purposes of the FBTAA and the ITAA 1997. As concluded at question 1, the seminar is the whole of the event and therefore the coach transfers and boat charter are not considered to be transport to bring attendees to the seminar. The return airfares and transfers discussed at question 2 are provided to bring employees to the seminar. The coach transfers and boat charter on day 4 are provided as entertainment.

Refer to question 10.

The same reasoning can applied to conclude that the coach transfers and boat charter constituted the provision of recreational entertainment and meets the definition of a fringe benefit provided by subsection 136(1) of the FBTAA. The same reasoning can again be applied to conclude that the minor benefits exemption contained in section 58P of the FBTAA does not apply. The benefits will either be entertainment facility leasing expenses or residual benefits. Importantly in relation to entertainment facility leasing expenses chapter 14 of the FBT Guide for employers states:

Boats or planes for providing entertainment

Expenses incurred in hiring or leasing a boat or plane in their entirety for the purposes of providing entertainment will be 'entertainment facility leasing expenses'.

For example, the hiring or leasing of a houseboat or a charter flight where the whole plane is hired for entertainment purposes would meet the definition of entertainment facility leasing expenses

If the benefits are residual benefits the taxable value cannot be reduced by the otherwise deductible rule as section 32-5 operates to deny a deduction for the costs and as the expenses are not incurred as travel expenses to bring the individuals to the seminar, the exception contained in section 32-35 does not apply.

You will therefore have a FBT liability in relation to the recreational entertainment benefits provided to your employees in the form of the coach transfer and boat charter.

Refer to question 2(b) above. The same reasoning can be applied to conclude that as your clients are not your employees for the purposes of the FBTAA you will not incur a FBT liability for the coach transfers and boat charter.

Refer to the reasoning discussed at 13(a) above. In providing the coach transfers and boat charter to your employees you are providing them with entertainment by way of recreation and the provision of these activities is a fringe benefit provided to your employees.

The costs incurred in providing a fringe benefit to your employee are deductible under subsection 8-1(1) of the ITAA1997. Section 32-20 of the ITAA 1997 operates to allow a deduction for the provision of entertainment where the loss or outgoing is incurred in respect of providing entertainment by way of providing a fringe benefit. None of the other reasons to disallow a deduction described in subsection 8-1(2) of the ITAA 1997 are relevant in this instance and therefore you are entitled to claim a deduction under section 8-1of the ITAA1997 in relation to the provision of the recreational entertainment on day four.

d) Can you claim an income tax deduction in relation to the coach transfers and boat charter in relation to your clients?

Refer to the reasoning at question 7(d) above. The same reasoning can be applied to conclude that you are providing your clients with entertainment by way of a fringe benefit and, for the same reasons, are entitled to an income tax deduction for the costs.

Question 14

Refer to question 8 above.

The same reasoning can be applied to conclude that the hire of the seminar location by you as a venue for a working session of the seminar is not a fringe benefit provided to your employees. Therefore, you will not incur an FBT liability in relation to the hire of the seminar location for your employees.

Refer to question 2(b) above.

The same reasoning can be applied to conclude that as your clients are not your employees for the purposes of the FBTAA you will not incur a FBT liability for the hire of the seminar location in relation to your clients.

The costs incurred in relation to the hire of the seminar location are expended in order to provide training to your employees.

Refer to the reasoning at question 8(c) above. The same reasoning can be applied to conclude that the costs incurred in relation to hire of the seminar location on day four are deductible expenses under section 8-1 of the ITAA 1997. The costs are expended to enable your employees to receive the training provided at the training session and are considered to be an outgoing incurred in carrying on a business for the purpose of gaining or producing assessable income and are not prevented from being a deduction for any of the reasons contained in subsection 8-1(2) of the ITAA 1997. Therefore the costs are deductible under section 8-1 of the ITAA 1997.

Question 15

(a) Will you incur a fringe benefits tax liability for the entertainment act provided to your employees at the feedback seminar?

Refer to question 10(a) above.

The same reasoning can be applied to conclude that the provision of the entertainment act to your employees constitutes recreational entertainment and is a fringe benefit for the purposes of subsection 136(1). For the same reasons as the other items of recreational entertainment discussed in question 10(a), the provision of the entertainment by way of the entertainment act to your employees is not a minor benefit, is a residual fringe benefit and the taxable value cannot be reduced by the otherwise deductible rule.

(b) Will you incur a fringe benefits tax liability for the entertainment act provided to your clients at the feedback seminar?

Refer to question 2(b) above.

The same reasoning can be applied to conclude that the provision of the entertainment act provided to your clients will not result in an FBT liability for you as your clients are not your employees as required by subsection 136(1) of the FBTAA.

(c) Can you claim an income tax deduction in relation to the entertainment act provided to your employees at the feedback seminar?

The provision of the entertainment act to your employees constitutes 'entertainment' for the purposes of both the FBTAA and the ITAA1997, is a fringe benefit.

Refer to question 7(c) above.

The same reasoning can be applied to conclude that you are entitled to claim an income tax deduction in relation to the entertainment provided by the entertainment act to your employees at the feedback seminar.

(d) Can you claim an income tax deduction in relation to the entertainment act provided to your clients at the feedback seminar?

Refer to the reasoning at question 7(d) above. The same reasoning can be applied to conclude that you are providing your clients with a fringe benefit under an arrangement and the costs incurred are deductible under section 8-1 of the ITAA 1997.

Question 16

(a) Will you incur a fringe benefits tax liability for the drinks provided to your employees on the boat trip?

Refer to 7(a) above. The same reasoning can be applied to conclude that the drinks on the boat trip on day four constitute meal entertainment and will be valued as a property benefit where the taxable value cannot be reduced by the use of the otherwise deductible rule. The benefits are not considered to be minor benefits and are therefore not exempt benefits. The benefits meet the definition of a fringe benefit in accordance with subsection 136(1) of the FBTAA and therefore you will incur an FBT liability in relation to the provision of the drinks on the boat trip.

(b) Will you incur a fringe benefits tax liability for the drinks provided to your clients on the boat trip?

Refer to question 2(b) above.

The same reasoning can be applied to conclude that as your clients are not your employees for the purposes of the FBTAA you will not incur a FBT liability for drinks provided on the boat trip.

(c) Can you claim an income tax deduction in relation to the drinks provided to your employees on the boat trip?

Refer to the reasoning at question 7(c) above.

The same reasoning can be applied to conclude that you are entitled to claim an income tax deduction in relation to the drinks provided to your employees on the boat trip.

(d) Can you claim an income tax deduction in relation to the drinks provided to your clients on the boat trip?

Refer to question 7(d) above.

The same reasoning can be applied to conclude that you are providing your clients with a fringe benefit under an arrangement and the costs incurred are deductible under section 8-1 of the ITAA 1997.

Question 17

Refer to question 4(a) above.

The same reasoning can be applied to conclude that the provision of lunches to your employees on the final day of the event:

Therefore, you will not have a fringe benefits tax liability in relation to the provision of the lunches to your employees on the final day of the event.

b) Will you incur a fringe benefits tax liability for the lunches provided to your clients on the final day of the event?

Refer to question 2(b) above. The same reasoning can be applied to conclude that as your clients are not your employees for the purposes of the FBTAA you will not incur a FBT liability for the lunches provided to them on the final day of the event.

c) Can you claim an income tax deduction in relation to the lunches provided to your employees on the final day of the event?

Refer to question 4(c) above.

The same reasoning can be applied to conclude that you would be entitled to an income tax deduction in relation to the lunches provided to your employees on the final day of the event.

d) Can you claim an income tax deduction in relation to the lunches provided to your clients on the final day of the event?

Refer to question 4(d) above.

The same reasoning can be applied to conclude that you would be entitled to an income tax deduction in relation to the lunches provided to your clients on the final day of the event.

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