This entertainment benefits cap refers to salary sacrificed meals, entertainment and entertainment facility leasing expenses. This cap will have a major impact on the not-for-profit (NFP) sector.
“The main problem with this change is that the effective value of other NFP salary packaging opportunities has been diminishing over time and entertainment packaging was a way of combatting this. It might now be harder for NFPs to attract and retain high calibre employees,” comments Elizabeth Lucas, Fringe Benefits Tax Specialist at Grant Thornton Australia.
According to accounting and advisory firm Grant Thornton Australia, this type of change was expected by the sector, but exceeds what most would view as fair. Some organisations have imposed their own internal caps, but most are around $5,000 in expenses (not grossed up).
“Any entertainment benefits exceeding the new cap would then be counted towards the existing general cap. All entertainment benefits are also proposed to be included as reportable fringe benefits. One hopes this is a reference to salary packaged benefits only and not, for instance, the staff Christmas party,” Lucas says.
The measure is intended to be effective from 1 April 2016, potentially generating activity as individuals re-visit their salary packaging in the meantime.