Fringe benefits tax: where an employer provides entertainment to both employees and non-employees, what is an acceptable method of determining the portion applicable to the employees for the purposes of the Fringe Benefits Tax Assessment Act 1986 (the Act)?

Where entertainment is provided by an employer a fringe benefit may arise under the Act. However, only that part of the benefit which relates to entertainment provided to an employee (or an associate of an employee) is subject to fringe benefits tax. Where the entertainment is provided to employees and non-employees jointly, it is necessary to determine that part of the benefit which relates only to the employees.

Where that part of the benefit which relates to employees only is not easily extracted from the available information, this Office will accept the use of a 'per head' basis of apportionment. However, a 'per head' basis will not be accepted where such a method would produce a clearly unreasonable result. Example Mary entertains 3 of her employer's clients at a local restaurant. In addition to paying for her own meal, Mary pays for the meals of the clients. Mary's employer reimburses Mary for the cost of the meals. The benefit provided to Mary is an expense payment fringe benefit. The taxable value of that benefit will be accepted as 25% of the amount reimbursed to Mary.