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Edited version of private advice
Authorisation Number: 1012619420538
Ruling
Subject: Entertainment facility leasing expenses and the cap for a public benevolent institution
Question 1
Where the entity reimburses expenses incurred by employees on holiday accommodation are the benefits disregarded for the purposes of subsection 5B(1L) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Answer
Yes
Question 2
Where the entity reimburses expenses incurred by employees on venue/function room hire are the benefits disregarded for the purposes of subsection 5B(1L) of the FBTAA?
Answer
Yes.
This ruling applies for the following periods:
Year ended 31 March 2015
Year ended 31 March 2016
Year ended 31 March 2017
The scheme commences on:
1 April 2014
Relevant facts and circumstances
The entity is a public benevolent institution (PBI) endorsed under section 123C of the FBTAA. As a result of this endorsement it can claim the exemption available to benefits provided to employees of PBI's contained in section 57A of the FBTAA.
It is considering covering the employees' accommodation costs whilst on holidays by paying the following expenses incurred by employees:
• Holiday house
• Hotel/motel room
• A room or cabin at a holiday resort
• A room/suite (but not food or drink) at a bed and breakfast
• An on-site caravan and/or cabin
• A serviced or self-contained apartment; and
• An entire houseboat
In respect of venue/function hire the entity is considering paying following expenses incurred by employees:
• A reception centre or function room for an entertainment event (for example a wedding reception or party)
• A marquee for an entertainment event (for example wedding reception or party)
• An entire boat or plane for the purposes of a social event: and
• An entire corporate box
No part of the expenses will be for the provision of food, drink or advertised.
During the employee's holiday travel the employee will not otherwise be travelling for work-related purposes.
Relevant legislative provisions
FBTAA subsection 5B(1E)
FBTAA subsection 5B(1L)
FBTAA section 57A
FBTAA section 123C
FBTAA subsection 136(1)
Reasons for decision
Section 5B of the FBTAA is used to determine an employer's aggregate fringe benefits amount and subsection 5B(1L) is used in to help determine an employer's aggregate non-exempt amount under subsection 5B(1E) of the FBTAA. Subsection 5B(1L) states in part:
An employee's subsection (1L) amounts for the year of tax are worked out as follows.
Method statement
Step 1.
Work out for each employee his or her share (if any) of the amounts that, if section 57A did not apply, would be the taxable values of the excluded fringe benefits for the year of tax in respect of the employee's employment by the employer if those benefits were not excluded fringe benefits, but disregarding benefits:
(a) that constitute the provision of meal entertainment as defined in section 37AD (whether or not the employer made an election under section 37AA); or
(b) that are car parking fringe benefits; or
(c) whose taxable values are wholly or partly attributable to entertainment facility leasing expenses. . .
This means that the excluded benefits listed in step 1 are ignored by an employer when calculating their aggregate non-exempt amount under subsection 5B(1E) of the FBTAA). In this case we are looking at taxable values that are wholly or partly attributable to entertainment facility leasing expenses.
Entertainment facility leasing expenses are defined in subsection 136(1) of the FBTAA as:
entertainment facility leasing expenses , for a person, means expenses incurred by the person in hiring or leasing:
(a) a corporate box; or
(b) boats, or planes, for the purpose of the provision of entertainment; or
(c) other premises, or facilities, for the purpose of the provision of entertainment;
but does not include so much of any of such expenses that:
(d) is attributable to the provision of food or drink; or
(e) is attributable to advertising and is an allowable deduction for the person under the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 .
This definition was examined in ATO Interpretative Decision ATO ID 2009/45 Fringe Benefits Tax Entertainment Facility Leasing Expenses: private function room and hotel room expenses. This ATO ID addressed the following issue:
Where the employer reimburses expenses incurred by the employee on leasing or hiring a private function room and hotel room, are the tax-exempt body entertainment benefits, benefits whose taxable values are wholly or partly attributable to entertainment facility leasing expenses and therefore disregarded for the purposes of subsection 5B(1L) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
The decision in respect of that issue was:
Yes. As the employee has incurred expenses which are entertainment facility leasing expenses, the tax-exempt body entertainment benefits are disregarded for the purposes of subsection 5B(1L) of the FBTAA.
That decision was based on the following facts:
The employer of the employee is a public hospital.
The employee has incurred expenses on hiring a private function room at a club for a family celebration.
The employee also incurred accommodation costs for the exclusive use of a hotel room in a hotel whilst travelling on holidays.
The employer reimburses the employee for the expenses incurred in hiring the private function room and for the expenses incurred for the use of the hotel room.
No part of the expenses are for the provision of food or drink, or advertising.
During the holiday travel, the employee was not otherwise travelling on work related purposes.
In addition the hiring of a marquee was specifically addressed in ATO Interpretative Decision ATO ID 2009/141 Fringe Benefits Tax Entertainment facility leasing expenses: hire of a marquee. The issue there was:
Where an employee hires a marquee for use at the employee's home for the purpose of the provision of entertainment, is the marquee a 'facility' as that term is used in the definition of 'entertainment facility leasing expenses' under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
The decision in ATO ID 2009/141:
Yes. The marquee is a 'facility' as that term is used in the definition of 'entertainment facility leasing expenses' under subsection 136(1) of the FBTAA.
The facts in ATO ID 2009/141 are the same facts as those in ATO ID 2009/45 which are quoted above.
In looking at the benefits the entity intends to provide they are similar to those being provided as those addressed in ATO ID 2009/45 and ATO ID 2009/141.
Therefore, although not quoted here, the detailed 'Reasons for Decision' contained in both ATO ID 2009/45 and ATO ID explain why all the benefits the entity proposes to provide can be disregarded under section 5B(1L) of the FBTAA.