entertainment+FBT+Guide

https://www.charteredaccountants.com.au/~/media/Files/Industry%20topics/Business%20management/Working%20in%20Business/BC_Business_Guidance_Notes_7_FA.ashx

As part of the Institute’s ongoing efforts to provide members with guidance and information on key issues, it has developed a Business Guidance Note series, written by members for members. The following types of fringe benefits may arise from providing entertainment: Fringe Benefits Tax Fringe benefits tax (FBT) arises when the employer provides certain benefits to employees in addition to their normal remuneration. The benefit is provided to someone because they are an employee. This paper focuses on explaining entertainment fringe benefits and their applicability, as per the table on the left. Entertainment Indicators In order to determine when food or drink provided to a person results in entertainment, the circumstances surrounding the provision of food or drink must be examined: (a) Why is the food or drink being provided? This is a purpose test. For example, food or drink provided for the purposes of refreshment does not generally have the character of entertainment, whereas food or drink provided in a social situation, where the purpose of the function is for employees to enjoy themselves, has the character of entertainment.
 * > a meal entertainment fringe benefit, where fringe benefits are provided by way of, or in connection with food or drink

Reducing FBT expense The amount of FBT can be reduced by: > not reimbursed. > Payroll Tax > Payroll tax is incurred on the majority of expenses that attract FBT in relation to Australian resident employees, as these are considered a benefit to the employees in addition to their salary. Genuine reimbursements of work related expenses are excluded. > This Business Guidance Note is an initiative of the Institute’s NSW Corporate Advisory Panel and has been prepared by the following contributor: > Brendon Glass CA Macquarie Bank Ltd > minor benefits. > rules according to whether the benefit is an expense payment, property or residual fringe benefit. Where you provide recreational entertainment by hiring or leasing entertainment facilities, and the benefit is a residual fringe benefit, you may elect to use the 50-50 split method. > – 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. > Entertainment Indicators > > > or immediately before, or after the conference is considered to be incidental to attending the conference and should not be subject to FBT. Refer to http://law.ato.gov.au/atolaw/view.htm?DocID =SAV%2FFBTGEMP3%2F00015 > > > Continued overleaf > > Source: ATO website employers guide to FBT http://www.ato.gov.au/businesses/ For further information on the guidance notes, please contact Karen McWilliams on +61 2 9290 5754 or karen.mcwilliams@charteredaccountants.com.au
 * > replacing fringe benefits with cash salary or allowance
 * > providing benefits that employees would be entitled to claim as an income tax deduction if they had paid for the benefits themselves (the ‘otherwise deductible’ rule which reduces the taxable value to nil)
 * > providing benefits that are exempt from FBT, or
 * > using employee contributions. Generally, the contribution is a cash payment made by the employee to the employer towards the benefit. For example, the employer offers employees tickets to a sporting event for $20 each that have a cost price of $50. An employee can also make an employee contribution towards a car fringe benefit by paying for some of the operating costs (such as fuel) that are
 * > Minor Benefit Exemption – An employee benefit which has a value of less than $300 may be a minor benefit. Where the employer provides an employee with separate benefits that are in connection with each other, for example, a meal, a night of accommodation and taxi travel, each individual benefit provided to the employee must be considered to determine if the value of each benefit is less than $300. If the value of a benefit is less than $300, it must be determined whether it would be unreasonable to treat the minor benefit as a fringe benefit. The value, frequency and regularity of the provision, together with recording and valuation difficulties, should be considered before concluding if a minor benefit exemption is applicable. Staff gifts less than $300 for birthdays, rewards for performance, periods of service, weddings, and farewells would all be deemed
 * > Value – The taxable value of recreational entertainment is calculated using the respective valuation
 * > Keep appropriate records – You should record information relating to entertainment so that the taxable value of the fringe benefit can be calculated. You should record:
 * > Report – Entertainment provided by way of food or drink, and benefits associated with that entertainment, such as travel and accommodation (regardless of which category is used to value the benefit) are excluded benefits for reporting purposes and so they are not included in your employees’ reportable fringe benefits amount on their payment summary. Expenses associated with hiring or leasing entertainment facilities are excluded fringe benefits for reporting purposes and are, therefore, not reportable. Other types of recreational entertainment, such as theatre tickets, are subject to the reporting requirements.
 * 1)  Staff entertaining expenses should be grossed-up in the general ledger to factor in the FBT cost. Employers will be liable for the FBT in addition to the value of the expense. These expenses are deductible for income tax purposes.
 * 1)  Client entertaining expenses will not need to be grossed-up for FBT cost. However, it is important to remember that these entertainment expenses will not be deductible for income tax purposes.
 * 1)  The table available on the ATO website is a useful template in assessing whether FBT is applicable to entertainment. It is also a very practical tool for educating key stakeholders within your business regarding FBT applicability http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR9717/ NAT/ATO/00001#P25 If attending a conference of over four hours, the costs of dinners during
 * 1)  If a spouse accompanies an employee on a conference or business trip, accommodation costs should be able to be allocated to the employee as a travel of business cost and there should not be a need to allocate some of the cost to the spouse provided that there is no incremental cost incurred for the spouse.
 * 1)  It may be cost effective to provide employees with an allowance when travelling rather than reimburse or incur the costs directly. Where allowances are provided within the ATO’s published guidelines, the allowances will not be taxable and will not require documentation.