Fringe Benefits Tax and Entertainment: How It Works

Most employers calculate FBT on meal entertainment using either:

• The Actual Method, or
• The 50/50 Method

Each approach has different outcomes for tax deductibility and FBT liability.

1. Using the Actual Method

Under the actual method, you split entertainment costs between:

• Employees and their family members, and
• Non‑employees (for example, clients)

The rules are:

• Meal entertainment for employees and their associates is typically deductible and subject to FBT (unless a specific exemption applies).
• Meal entertainment for non‑employees is not subject to FBT and not deductible.

2. Using the 50/50 Method

Instead of tracking who attended, many employers choose the simpler 50/50 method.

Under this approach:

• 50% of all meal entertainment is subject to FBT and tax deductible.
• 50% is not deductible and not subject to FBT.

This applies regardless of where the event is held or who attends.

Key traps to note when using the 50/50 method:

• Food and drink for employees on your premises is not exempt from FBT.
• The minor benefit exemption does not apply.
• The taxi travel exemption (for trips to or from the workplace) also cannot be used.

Minor Benefit Exemption — Under $300

A benefit provided to an employee or their associate may be exempt from FBT if:

• It costs less than $300 (including GST), and
• It is provided infrequently and irregularly

Importantly:

• Different benefits provided at the same time (e.g. party + gift) are not added together when determining the $300 threshold.
• Entertainment that is exempt from FBT is not deductible.
• “Less than $300” means $299.99 or less. A $300 benefit will be subject to FBT.

Example — Christmas Party

An employer holds a staff Christmas party for 40 people (employees + spouses).
Cost per head for food and drink: $250.

Using the Actual Method

• Each benefit is below $300, so the minor benefit exemption can apply.
• No FBT is payable.
• Because the benefit is entertainment and exempt, the cost is not deductible.

Using the 50/50 Method

• Total spend: $10,000
• FBT applies to $5,000 (50%), and that portion is deductible.

Christmas Gifts: Entertainment vs Non‑Entertainment

Choosing the right type of gift changes the tax outcome.

Non‑Entertainment Gifts

Examples: hampers, wine, perfume, flowers, gift vouchers, stationery, etc.

• Employees / family: FBT applies unless the minor benefit exemption applies. Deductible when FBT applies or exemption applies.
• Clients / suppliers: No FBT. Deductible.

Entertainment Gifts

Examples: theatre tickets, sporting events, movie passes, theme parks, holiday travel.

• Employees / family: FBT applies unless under $300. Deductible when FBT applies.
• Clients / suppliers: No FBT. Not deductible.

Combining Gifts with a Christmas Party

An employer holds a restaurant Christmas party costing under $300 per person and gives employees a $150 gift voucher.

Using the Actual Method

• Party cost per person < $300 → FBT‑exempt. Not deductible.
• Gift < $300 → FBT‑exempt. Deductible.

Using the 50/50 Method

• 50% of food/drink → FBT applies and is deductible.
• Gifts < $300 → No FBT. Deductible.
• Gifts are deductible because they are not entertainment.

Need Clarity on Your Christmas Event?

These rules can get complicated—especially when different types of benefits overlap.

If you’re planning staff events or gifts and want to be sure you’re treating them correctly for FBT and tax purposes, our team can help.

Speak to your RJS accountant for guidance tailored to your business.

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