Contact: Gavin Clancy
Deloitte
Communications Manager
+61 3 9208 7759

Contact: Karen Stein
Deloitte
Partner - Indirect Taxes
+61-2-9322 7387

Employers who hold conferences and team-building activities for staff may be unwittingly contributing to fringe benefits tax liabilities, according to Deloitte.

Deloitte says that many employers are unaware that recreational activities, such as white water rafting, high ropes climbing, sailing and golf days, which are provided for team building purposes, will be categorised as entertainment and therefore be subject to FBT.

Deloitte Indirect Tax Partner Karen Stein says that although the intention of the activity is to encourage team building and staff development, the nature of the activity may be viewed as entertainment.   

“A parallel can be drawn between this and employees attending business lunches,” Ms Stein said. 

“Although the lunches may have a business purpose, the Australian Taxation Office classifies them as entertainment, with the employees’ portion being subject to FBT.”

She said there was still time to achieve FBT savings before the end of the FBT year on 31 March. 

“Employers should be aware of the compliance measures which should be in place to capture relevant information for FBT purpose,” Ms Stein said. 

“Listings of attendees are necessary to determine the allocation of the fringe benefit per employee.  This is relevant to determine whether the minor & infrequent rule applies to reduce the taxable value of the benefit to zero.  The correct application of this rule can reduce the employer’s FBT liability.”

The analysis of the recreational fringe benefits will also be relevant for establishing the reportable fringe benefits amount for each employee, which is used to calculate particular levies and surcharges, including Medicare levy surcharge, HECS, and Family Allowances. 

Ms Stein said although the liability for FBT remained with the employer, the grossed-up value of fringe benefits was used to calculate reportable fringe benefits of employees.

“The grossed-up value is used to compute a number of surcharges and levies relevant to the employee, such as the Medicare levy and superannuation surcharges, HECS debts and family allowances,” she said. 

FBT returns are due for lodgement on 28 May 2004 when lodged through a tax agent.