How to work out FBT on entertainment

Step 1: Determine if the food, drink or recreation is considered entertainment

Whether you're in business, a not-for-profit organisation or government, you first need to work out if food, drink or recreation you provide is considered entertainment.

Step 2: Determine if the entertainment is a tax-exempt body entertainment fringe benefit

This only affects not-for-profit and government organisations.

A tax-exempt body entertainment fringe benefit is a non-deductible entertainment benefit provided to employees (or their associates) by an income tax exempt organisation.

Step 3: Check if the benefit is exempt from FBT

Check the exemptions and concessions for:

• businesses
• not-for-profit and government organisations.

Step 4: Check if you can reduce your FBT liability

There are several ways you can reduce your FBT. For example, you can provide a cash bonus instead of a benefit, or your employee might contribute to the cost of the entertainment.

Step 5: Calculate the taxable value of the entertainment

Before you can work out any FBT liability, you need to calculate the taxable value of entertainment-related benefits.

Step 6: Lodge, report and pay FBT

If you have an FBT liability, you will need to:

• calculate how much FBT to pay
• lodge your FBT return
• pay the FBT you owe
• check if you should report the fringe benefit in your employee's payment information through Single Touch Payroll (or on your employee’s payment summary).

Claiming tax deductions and GST credits

You can generally claim an income tax deduction and GST credits for the cost of providing entertainment that is a fringe benefit. This does not apply to exempt benefits because they are not fringe benefits.

• If you can claim GST credits, you claim the GST-exclusive fringe benefit amount as an income tax deduction.
• If you can't claim GST credits, you claim the whole fringe benefit amount as an income tax deduction.
• Income tax exempt organisations do not claim income tax deductions.

Entertainment benefits provided to people other than employees or their associates (to clients for example) are not subject to FBT and are generally not income tax deductible for employers.

For more information see FBT guide: 14.15 Income tax deductibility.

Use these steps to work out the FBT on food, drink and recreation you provide to employees.