Not-for-profits and changes to Fringe Benefits Tax (FBT)
On 1 April 2016 the government introduced a $5,000 grossed-up cap per employee for salary sacrificed Meal Entertainment and Entertainment Facility Leasing Expenses.
This effects rebateable and FBT exempt employers.
In the past these types of employers could provide an unlimited amount of Meal Entertainment to employees without incurring any FBT liability. This meant a lot of people were sacrificing their salary to pay for their weddings and big events without their employer incurring any FBT liability.
Other types of benefits are limited to another grossed-up cap which is currently $31,177 which drops to $30,000 on 1 April 2017.
These changes mean that when it comes time to complete your FBT return you will need to ensure you’re correctly allocating employees’ individual benefits.
The $5,000 cap only applies to Meal Entertainment and Entertainment Facility Leasing Expenses. This includes benefits like dinners at restaurants and venue hire but excludes recreational items such as movie tickets and gym memberships. This means that any benefits which fall under the recreation classification will reduce the larger $31,177cap and not the $5,000 cap.
Basically, Meal Entertainment is food or drink but when travel and accommodation is provided in connection with Meal Entertainment it will also be classified as Meal Entertainment and can be included in the $5,000 cap.
Entertainment Facility Leasing Expenses are the hiring or leasing of a corporate box; boats, or planes, or other premises and facilities for the purpose of the provision of entertainment.
The table below outlines the differences between the three types of entertainment.
|Meal Entertainment||Entertainment Facility Leasing Expenses||Recreation Entertainment (Ordinary Expense Benefit)|
|$5,000 cap*||$5,000 cap*||$31,177 cap|
|Meals in restaurants or cafés whilst on holidays or at other times||Venue hire for parties, events etc. Including marquee hire||Flights|
|Complete holiday packages that includes food and drink, accommodation and travel (may include flights)||Corporate box at a sporting event||Theatre, film, theme park, zoo, tour, sporting etc. tickets|
|Car parking incurred whilst having a meal at a restaurant; or taxi fares to the restaurant||Any holiday accommodation including: hotel rooms, on-site caravans & apartments||Groceries, take-aways or alcohol purchased from wholesale or retail outlets|
|Catering for parties||Cruises||Gym memberships|
|Chartered flights, boats||Ancillary entertainment for parties e.g. DJ, magician or band.|
*Once the $5,000 entertainment cap is reached, the $31,177 cap can be utilised for any excess.
The $5,000 cap only applies to salary packaged meal entertainment. If employers provide meal entertainment that is not part of a salary sacrifice then this amount is excluded from either cap and will not incur an FBT liability, for example: an annual Christmas party.