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FBT changes for employees – Salary packaged meal and other entertainment benefits

FBT changes for employees – Salary packaged meal and other entertainment benefits

From 1 April 2016, there are changes to the fringe benefits tax (FBT) treatment of salary packaged meal entertainment and entertainment facility leasing expense benefits (meal and other entertainment benefits). If you receive these benefits from your employer, you need to be aware of these changes as they may affect your arrangements.

Some of the changes will affect all employees, while others will affect employees of not-for-profit organisations.

All employees

The following applies to all employees:

  • all salary packaged meal and other entertainment benefits are reportable and will be included on your payment summary where the reporting exclusion threshold is exceeded
  • the 50-50 split method and 12-week register method cannot be used by your employer for valuing salary packaged meal and other entertainment benefits, which may affect how much you can salary package.

Salary packaging

These changes only apply to meal and other entertainment benefits provided under a salary packaging arrangement. A salary packaging arrangement is an arrangement between you and your employer, whereby you agree to forgo part of your future entitlement to salary or wages in return for your employer providing you with benefits of a similar value.

A salary packaging arrangement is commonly referred to as salary sacrifice or total remuneration packaging.

Entertainment and fringe benefits

The following types of entertainment are subject to the changes:

  • entertainment by way of food or drink
  • accommodation or travel in connection with, or to facilitate the provision of, such entertainment
  • entertainment facility leasing expenses.

Entertainment facility leasing expenses are expenses incurred in hiring or leasing:

  • a corporate box
  • boats or planes for providing entertainment
  • other premises or facilities for providing entertainment.

Reporting on payment summaries

If the value of certain fringe benefits you receive exceeds $2,000 in an FBT year, your employer must also report the grossed-up taxable value of those benefits on your payment summary for the corresponding income year. These are reportable fringe benefits.

From 1 April 2016, salary packaged meal and other entertainment benefits are reportable and are included in determining whether the $2,000 threshold is exceeded. The lower gross-up rate is always used for calculating the grossed-up rate shown on an employee’s payment summary.

The amount reported on the payment summary is not included in your assessable income or affect the amount of standard Medicare levy payable. It is, however, included in a number of income tests relating to certain government benefits and obligations.

Not-for-profit employees

For employees who work for a not-for-profit employer:

  • a separate single grossed-up cap of $5,000 will apply for salary packaged meal and other entertainment benefits for employees of not-for-profit organisations able to access a general FBT exemption or rebate ($31,177 or $17,667 exemption; or $31,177 rebate)
  • the amount of those benefits exceeding the separate grossed-up cap of $5,000 are included in calculating whether the value of all benefits you receive exceeds your general FBT exemption or rebate cap.

This means that from 1 April 2016 you can receive such benefits worth between $2,329.59 and $2,549.98 (depending on whether your employer is entitled to GST credits) without exceeding the $5,000 cap.

The $5,000 cap

The single $5,000 cap for meal and other entertainment benefits provided under a salary sacrifice arrangement is available to each employee of a not-for-profit employer in an FBT year. If you work for more than one employer, you are entitled to the $5,000 cap for each employer that you work for in an FBT year.

Grossing up and the $5,000 cap

The $5,000 separate cap for meal and other entertainment benefits is the grossed-up amount. There is a different gross-up rate that is used depending on whether the not-for-profit employer is entitled to GST credits for the provision of the entertainment.

For more information, please contact the office.

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