Fringe Benefits Tax Legislation Passes
26 November 2015 at 10:55 am
Australian Not for Profit organisations face new rules on fringe benefits tax entertainment caps, following the approval in both houses of Parliament this week.
“Lobbying to increase the proposed new cap on concessional FBT [fringe benefit tax] treatment for entertainment has fallen on deaf ears,” Remuneration Taxes Partner at Grant Thornton Australia, Elizabeth Lucas, said.
“A $5000 cap in grossed up value of benefits will apply from 1 April 2016. This equates to a limit of about $2500 in actual entertainment expenditure that will qualify for an FBT exemption or rebate (depending on the organisation’s tax endorsement status).
“The $5000 cap applies to meal entertainment and entertainment facility leasing expenses. Salary packaged entertainment will become reportable on payment summaries and the 50-50 and 12-week register valuation options will no longer be available for salary packaged entertainment.”
Lucas said while the concept of a cap on entertainment packaging was welcome, there should also have been some recognition of the fact that this benefit was 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,” she said.
She said a number of transitional issues arise, principally where employees are reimbursed entertainment expenses, given the concession is uncapped until 1 April 2016, NFPs needed to consider whether they would allow prepayments, such as holidays, to be salary packaged and what the process would be to determine whether the holiday was taken or refunded and whether any tax adjustments needed to be made.
“If employees have accrued salary sacrifice balances for entertainment not yet taken at 31 March 2016, NFPs must consider whether these need to be paid out in full, or whether some can be carried forward,” she said.
Community Council for Australia CEO, David Crosbie, said that figures provided by the ATO showed the average FBT claim for the tax concession was $5500 so both the ALP and the Greens considered the $5000 cap would still cover the majority of claims from charity workers while reducing the more extreme claims of $100,000 – mostly from Medical Specialists.