“Lobbying to increase the proposed new cap on concessional FBT treatment for entertainment has fallen on deaf ears. A $5,000 cap in grossed up value of benefits will apply from 1 April 2016. This equates to a limit of about $2,500 in actual entertainment expenditure that will qualify for an FBT exemption or rebate (depending on the organisation’s tax endorsement status),” said Elizabeth Lucas, Remuneration Taxes Partner, Grant Thornton Australia.
“While we welcome the concept of a cap on entertainment packaging, there should also have been some recognition of the fact that this benefit is relied on by the NFP sector to ‘top up’ salaries, particularly as the real value of other salary packaging (with caps that are not indexed) has diminished over time. This situation could have been recognised with a higher cap or with some other benefit handed directly to the sector,” said Lucas.
A number of transitional issues arise, principally:
- Where employees are reimbursed entertainment expenses, given the concession is uncapped until 1 April 2016, consider whether you will allow prepayments (e.g. holidays) to be salary packaged and what your process will be to determine whether the holiday is taken or refunded and whether any tax adjustments need to be made.
- If employees have accrued salary sacrifice balances for entertainment not yet taken at 31 March 2016, consider whether these need to be paid out in full, or whether some can be carried forward.
For more information about sector tax issues, entertainment changes and car allowances or deductions, visit the Grant Thornton website.