FBT Q&A – Employee contributions towards meal entertainment

What is the FBT relevance of employee contributions towards meal entertainment?

Question

We are a tax-exempt body and do not elect to use the 50-50 or 12 week register method to calculate the taxable value for meal entertainment provided during the FBT year.

We provided an end of year party for our staff providing them meal entertainment. In order to attend the party, employees were required to pay $10 as a contribution towards the cost of the function.

Do the contributions made by the employees reduce the taxable value of the meal entertainment provided?

Answer

As you are using the ‘actual’ method to value your meal entertainment, the benefit provided will be a tax-exempt body entertainment fringe benefit.

The taxable value of the fringe benefit will be the portion of the expenditure incurred by the provider of the benefit that is attributable to the provision of entertainment to the employees. In calculating the taxable value of a tax-exempt body entertainment fringe benefit there is no reduction for contributions that may be made by an employee.

We note that if one of the valuation methods in Division 9A were elected (i.e. 50/50 or 12 week register), then section 37AB of the FBT Act allows for unreimbursed contributions from an employee or an associate of an employee to be excluded from the expenses or expenditure incurred in relation to meal entertainment benefits. The effect of this is reduce the meal entertainment total for the purposes of determining the taxable value.

This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.

This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.