An arrangement includes any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable by legal action.
An employee or recipient's contribution generally refers to the amount of consideration paid to an employer or provider by an employee or recipient in relation to the fringe benefit. It is reduced by the amount of any reimbursement paid to the employee or recipient related to that consideration. The employee or recipient's contribution must be made from the employee's after-tax income.
An employee contribution may be assessable income in the hands of the employer (as a general rule, the costs incurred by the employer in providing fringe benefits are income tax deductible).
Entertainment facility leasing expenses
Entertainment facility leasing expenses are expenses you incur in hiring or leasing:
- a corporate box
- boats or planes for providing entertainment, or
- other premises or facilities for providing entertainment.
Expenses (or parts of expenses) that are not entertainment facility leasing expenses are:
- expenses for providing food or beverages, and
- expenses for advertising that would be an allowable income tax deduction.
Excluded fringe benefits are certain fringe benefits you don't have to report on employees' payment summaries.
Exempt benefits are those benefits you provide for which you don't have to pay FBT.
Expense payment fringe benefit
You may provide an expense payment fringe benefit if an employee incurs expenses and:
- you reimburse them for the expenses, or
- you pay a third party for the expenses.
The expenses can be business or private expenses or a combination of both, but they must be incurred by the employee.
If you incur the expense, for example through a corporate credit card, you don't have an expense payment fringe benefit. You could, however, have a property or residual fringe benefit depending on what is paid for.
Basically, a fringe benefit is a benefit provided to an employee (or their associate, such as a family member) because that person is an employee. Benefits can be provided by an employer, an associate of the employer, or by a third party under an arrangement with the employer. An employee can be a current, future or former employee.
Fringe benefits tax
Fringe benefits tax (FBT) is a tax paid on certain benefits employers provide to their employees or their employees' associates (typically family members). FBT is separate from income tax and is based on the taxable value of the various fringe benefits provided.
Providing meal entertainment fringe benefits means:
- providing entertainment in the form of food or drink
- providing accommodation or travel connected with such entertainment, or
- paying or reimbursing expenses in obtaining a benefit covered by the above points.
In-house dining facility
A canteen, dining room or similar facility is an in-house dining facility if:
- it is located on your premises
- it is operated wholly or principally for providing food and drink on working days to your employees, and
- it is not open to the public at any time.
'Principally' means operated mainly for providing food or drink and is usually determined on a time basis. That is, operated for this purpose more than 50% of the time that it is used. However, time is not necessarily the sole criterion - you need to look at the facts, degree or impression of how the facility is used.
A canteen, dining room or similar facility can be an in-house dining facility even though it does not provide food and drink for all your employees. For example, a dining room for the sole use of your executive employees qualifies as an in-house dining facility.
A boardroom or a meeting room with kitchen facilities is not an in-house dining facility because:
- it is not a canteen, a dining room or a facility similar to a canteen or a dining room, and
- it is not operated wholly or principally for providing food and drink on working days to employees.
A boardroom or meeting room is used for, or operates mainly as, a venue for meetings or conferences.
Most of our publications have a NAT number (our catalogue number), which we generally show in brackets after the title of the publication, for example, Tax basics for small business (NAT 1908).
Under the PAYG withholding system, payers are required to provide payees with a payment summary, which shows total payments made and the amount of tax withheld during the financial year.
Property fringe benefit
A property fringe benefit may arise when you provide an employee with property, either free or at a discount. For FBT purposes, property includes:
- all goods, for example, food or drink
- real property, for example, land and buildings, and
- other property, for example, shares or bonds.
Reportable fringe benefits
If you provide fringe benefits with a total taxable value of more than $2,000 to an employee in an FBT year (1 April to 31 March), you must report the grossed-up taxable value of the benefits on the employee's payment summary for the corresponding income year (1 July to 30 June). These are called reportable fringe benefits.
Residual fringe benefit
Any fringe benefit that does not fit into one of the other 12 categories of fringe benefits is called a residual benefit. A residual fringe benefit may arise when you provide an employee with any right (such as a privilege, service or facility that is not one of the specific types of fringe benefits. For example, hiring a bus to take employees to a party is a residual fringe benefit.
This is the value of fringe benefits that you use as a basis for calculating your FBT liability. There are different rules for calculating the taxable value of the different types of fringe benefits.
Your organisation is a tax-exempt body if your organisation's income is either:
- wholly exempt from income tax, or
- partially exempt from income tax.
Tax-exempt body entertainment fringe benefit
A tax-exempt body entertainment fringe benefit is non-deductible entertainment provided to employees (and their associates) by a tax-exempt body. Only entertainment that is non-deductible for income tax purposes can give rise to this benefit. Where entertainment is deductible, it is not a tax exempt body entertainment fringe benefit.
For the purpose of identifying a tax-exempt body entertainment fringe benefit, and determining whether the expenditure is deductible for income tax purposes, the tax-exempt body is treated as though it is a taxable entity. That is, the employer should ask themselves, 'If my organisation paid income tax, would the organisation be entitled to an income tax deduction for this expenditure?