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Introducing a Cap for Salary Sacrificed Meal Entertainment and Entertainment Facility Leasing Expenses

Regulation Impact Statement – The Treasury

On 15 October 2015 the Government put forward the Tax and Superannuation Laws Amendment (2015 Measures No. 5) Bill 2015 which introduces a separate grossed-up cap of $5,000 for salary sacrificed meal entertainment and entertainment facility expenses (meal entertainment benefits) for employees of employers able to access a general fringe benefits tax (FBT) exemption or rebate. In addition, all use of salary sacrificed meal entertainment benefits would become reportable. Most salary sacrificed fringe benefits provided to certain employees of not for profit organisations are reportable and FBT exempt, or rebatable, only up to a set cap. For instance, employees of public benevolent institutions and health promotion charities have a standard $30,000 FBT exemption cap and employees of public and not for profit hospitals and public ambulance services have a standard $17,000 FBT exemption cap. However, meal entertainment benefits were previously excluded from these caps. That is, these benefits were not required to be reported and were not taken into account when considering whether an employee had exceeded the FBT caps. This means that such benefits were uncapped. The Bill amends the Fringe Benefits Tax Assessment Act 1986 to limit the concessional treatment of salary packaged entertainment benefits by:

  • removing the reporting exclusion for salary packaged entertainment and entertainment facility leasing expense benefits
  • removing access to elective valuation rules when valuing salary packaged entertainment benefits
  • introducing a cap on the total amount of salary packaged entertainment that certain employees can be provided that are exempt from or subject to fringe benefits tax at concessional rates.

A Regulation Impact Statement (RIS) was prepared and certified by the Treasury, and has been assessed as compliant and best practice by the Office of Best Practice Regulation (OBPR). The RIS estimates the average regulatory cost at $690,000 per annum, and identifies offsets. The OBPR has agreed to the regulatory cost and offset estimates.