FBT and
GST
24 June 2008
Organised by the Office of Chief Accountant
3/23/2016
Salary Packaging at the University
• Future direction is to continue to outsource
provision of benefits to external service
providers
• Examples are novated car leases and laptops
• However University still must determine its
FBT and GST compliance on expense
reimbursements – mainly entertainment
3/23/2016
Entertainment Expenditure
• FBT year 2008 University spent $1.6M
on entertainment
• The FBT cost associated with this was
$0.7M
• About 1,000 transactions per month
3/23/2016
Why is “Entertainment” important to identify?
• University is liable to FBT on the
provision of entertainment as a tax
exempt body
• As a tax exempt body some exemptions
that are available to private sector
bodies do not apply to the University
3/23/2016
FBT exemptions not applicable to the University
Where “entertainment” can be identified -
• Minor benefits <= $300 e.g. Xmas party
• “At Work” provision of food and drink
3/23/2016
There must be “Entertainment”
• “Entertainment” v “Sustenance”
• Food and drink is not always entertainment
e.g. business travel, light meals
• Entertainment may also include ancillary
costs and non-food and drink items e.g. taxis
to venue, gym membership etc
3/23/2016
Why is “Entertainment” important to identify?
• University is able to calculate its FBT
liability on meal entertainment on a
deemed basis e.g. 50/50 split between
non-employees and employees
• University currently uses an actual “per
head” method
3/23/2016
Example of Actual “Per Head” basis
Business Lunch is attended by 2
employees and 5 visitors. University
reimburses its employee for entire cost
of the meal. FBT portion is 2/7th of the
expenditure on the lunch.
3/23/2016
Finance and Accounting Manual
“Non-Allowable Expense Procedures”
4 December 2007
• Monetary limits on social functions
• Restriction on entertainment to legitimate
University business e.g. business travel
• Light meals at staff meeting e.g.
sandwiches and non-alcoholic drinks
• Training seminars and work retreats
3/23/2016
Spendvision
• Correct use of classification codes
• Classification codes reflect Taxation Office
administrative guidelines
3/23/2016
Spendvision
• We still need to make thresholds decisions
about what is “entertainment” and what is
not – we’ll run through some examples
• We cannot be descriptive about this –
some judgment must be exercised!
3/23/2016
SOCIAL FUNCTIONS
Spouse/
Other
Entertainment?
Employee
family
persons
On Premises
YES
FBT
FBT
-
Off Premises
YES
FBT
FBT
-
3/23/2016
Social Functions
• Regarded as meal entertainment
• Non-food and drink expenditure ancillary
to the social function e.g. taxis, venue hire
• Minor benefit exemption (<=$300 per
head) will not apply to University
• Friday night drinks
• Staff meetings at cafes, restaurants
3/23/2016
Example
Staff meeting takes place at a restaurant
or café outside the University – does this
involve the provision of entertainment?
Staff member seeks reimbursement of
meal costs.
What happens if staff meeting takes place
at the University and alcohol is provided?
3/23/2016
Coding – Social Function
Food & Drink
Taxi to venue
Other Costs
Employee
Meal Entertainment
FBT
Meal Entertainment
NO FBT/NO GST
Entertainment
FBT
Family
Meal Entertainment
FBT
Meal Entertainment
FBT
Entertainment
FBT
Non
Employee
Meal Entertainment
NO FBT/NO GST
Meal Entertainment
NO FBT/NO GST
Entertainment
NO FBT/NO GST
3/23/2016
Coding – Social Function
When we say “NO GST” on non-employee
entertainment we mean no entitlement to a
GST input tax credit whether GST is on
the invoice or not
3/23/2016
Social Functions – other costs
• Transport expenses and other non food
and drink costs e.g. venue hire can be
included in entertainment
• Code these costs to Entertainment and
Meal Entertainment
• Taxi travel from work to venue is FBT
exempt
3/23/2016
PROMOTIONS
Spouse/ Other
family persons
Entertainment?
Employee
On Premises
YES
FBT
FBT
-
Off Premises
YES
FBT
FBT
-
3/23/2016
Promotional Events
• Food and drink is normally regarded as
being provided by way of entertainment
• Promotional events e.g. cocktail parties
that are not open to the general public
3/23/2016
Coding – Promotions
Food & Drink
Other Costs
Employee
Meal Entertainment
FBT
Entertainment
FBT
Family
Meal Entertainment
FBT
Entertainment
FBT
Non
Employee
3/23/2016
Meal Entertainment
Entertainment
NO FBT/NO GST
NO FBT/NO GST
BUSINESS DINNERS
Spouse/ Other
family persons
Entertainment?
Employee
On Premises
YES
FBT
FBT
-
Off Premises
YES
FBT
FBT
-
3/23/2016
Business Dinners Example
• University of NSW employee is invited to
dinner by a University of Sydney staff
member and his wife
• Neither person is travelling on business
• The entire meal cost is treated as meal
entertainment
3/23/2016
Coding - Business Dinners
Food & Drink
3/23/2016
Employee
Meal Entertainment FBT
Family
Meal Entertainment FBT
Non Employee
Meal Entertainment
NO FBT/NO GST
BUSINESS TRAVEL
Off Premises
3/23/2016
Spouse/
Other
Entertainment?
Employee
family
persons
NO
-
FBT
-
YES
FBT
FBT
-
Business Travel
• Food and drink is regarded as being
provided by way of “self-entertainment”
even if two or more employees dine
together
• Remember “substantiation” requirements
• Contrast to Per Diem Allowances
3/23/2016
Example
Two staff members travel to Brisbane to
meet Uni Qld staff.
If the employees dine in the evening alone
or together this is not entertainment.
3/23/2016
Example
Two staff members travel to Brisbane to
meet Uni Qld staff. While there, they meet
up with a Uni Melb employee who is also
travelling on business
If all three dine together this is not
entertainment.
3/23/2016
Example
Two staff members travel to Brisbane to meet
Uni Qld staff. While there they meet up with a
Uni Melb employee who is also travelling on
business.
In the evening all three dine with a Uni Qld
employee who is not travelling. Syd Uni picks up
the tab. The Qld Uni staff member’s meal is
entertainment. The other meals are not
entertainment.
3/23/2016
Example
A Uni Qld staff member travels on business to Sydney to
meet with a Uni Syd employee.
The Uni Qld employee is invited to lunch. Wine is served
with the meal.
Uni Syd employee pays for the meal and seeks
reimbursement.
The portion of the meal costs attributable to the Uni Qld
employee is not entertainment. The meal cost
attributable to the Uni Syd employee is entertainment.
3/23/2016
Example
• What if I travel to Melbourne and back
within the day?
• I pay for a business lunch while I’m there.
Is this regarded as travelling on business?
• Taxation Office uses a rule of thumb that
travel must involve an overnight stay.
3/23/2016
Coding – Business Travel
Food & Drink
Employee
Travelling
Travel Expense NO FBT
Employee
Non Travelling
Meal Entertainment FBT
Non Employee
Travelling
Other expense NO FBT
Non Travelling
Meal Entertainment
NO FBT/NO GST
Non Employee
3/23/2016
LIGHT MEALS OFF CAMPUS
Off Premises
3/23/2016
Spouse/
Other
Entertainment?
Employee
family
persons
NO
FBT
FBT
-
Light meals off campus
What happens if I invite someone for
coffee or a light lunch? I invite a Uni NSW
employee for coffee and muffins in a local
café.
3/23/2016
Light meals off campus
What happens if I invite someone for
coffee or a light lunch while travelling? I’m
travelling in Paris and I invite a French
academic for brunch.
3/23/2016
Light meals off campus
THIS IS NOT MEAL ENTERTAINMENT!
3/23/2016
Coding – Light meals off campus
Food & Drink
Employee
Travelling
Travel Expense NO FBT
Employee
Non Travelling
FBT Other payment
Non Employee
Travelling
Other expense NO FBT
Non Employee
Non Travelling
Other expense NO FBT
3/23/2016
STAFF MEETING
On Premises
3/23/2016
Spouse/
Other
Entertainment?
Employee
family
persons
NO
-
FBT
-
Staff Meetings
• Light meals are regarded as sustenance
or refreshment in this instance – and not
as entertainment
• Examples are sandwich lunches even if
served with moderate amounts of alcohol
3/23/2016
Staff Meetings
• Staff farewell – if on premises and consists
of a cake, maybe some drinks, this is not
entertainment
• But if at a restaurant or held on premises
with more than moderate alcohol – then it
is meal entertainment
3/23/2016
Coding – Staff Meetings
Food & Drink
3/23/2016
Employee
Business meetings NO FBT
Family
Other payment FBT
Non Employee
Other expense NO FBT
AWARD PRESENTATIONS
On Premises
3/23/2016
Spouse/
Other
Entertainment?
Employee
family
persons
NO
-
FBT
-
Award Presentations
•
Large number of attendees. How do we
apportion?
•
A light meal served at an award
presentation is not regarded as meal
entertainment
3/23/2016
Coding – Award Presentations
Food & Drink
3/23/2016
Employee
Award Presentations NO FBT
Family
Other payment FBT
Non Employee
Other expense NO FBT
TRAINING SEMINARS > = 4 HOURS DURATION
Spouse/ Other
family persons
Entertainment?
Employee
On Premises
NO
YES
-
FBT
FBT
-
Off Premises
NO
YES
-
FBT
FBT
-
3/23/2016
TRAINING SEMINARS < 4 HOURS DURATION
Entertainment?
Employee
Spouse/
family
On Premises
NO
YES
FBT
N/A
N/A
-
Off Premises
NO
YES
FBT
N/A
N/A
-
3/23/2016
Other
persons
WORK RETREATS
Off Premises
3/23/2016
Spouse/
Other
Entertainment?
Employee
family
persons
YES
-
FBT
-
Training Seminars
Not subject to FBT
• Seminars > = 4 hours duration
• Work retreats held off premises
Subject to FBT
• Other seminars but only if entertainment is
provided e.g. would not include a light
meal provided at the seminar
3/23/2016
Training Seminars (cont.)
• Food costs e.g. light breakfast at a morning
seminar or a light meal with alcoholic drinks at
an evening seminar
• These costs are normally not separated from
training costs and are not considered to be
entertainment – relevant to external training
• Entertainment will exist if seminar <= 4 hours
duration and a substantial meal with alcohol is
served – rarely the case these days!
3/23/2016
Training Seminars (cont.)
• If the training seminar is held at the
University and is catered, identifying and
separating meal expenditure is an issue
• But again – light breakfasts and other
meals will not be seen as entertainment
3/23/2016
Work Retreats
The key is that the work retreat must:
• involve some discussion of business
matters/policy and/or training
• is held at an external conference centre
3/23/2016
Coding - Training
Business Seminars FBT exempt
Remember that it is unlikely that food and
drink served at seminars will be regarded
as meal entertainment!
3/23/2016
Coding - Training
But what about dinner provided at an
outside restaurant during the
conference/retreat?
This is a social function
3/23/2016
Recent FBT changes
• Increase in Reportable Fringe Benefit
reporting exemption limit to $2,000 taxable
value from 2008 FBT
• Budget announcement to reduce scope of
work related items exemption to one item
per employee e.g. one laptop per
employee
3/23/2016
QUESTIONS
3/23/2016
Question 1
Please explain the GST
treatment of grants and
appropriations received by the
University
3/23/2016
Grants, Appropriations and Transfers
These are subject to GST:
• Transfer of funds from another Uni
• Grants from a private sector business
3/23/2016
Grants, Appropriations and Transfers
These are NOT subject to GST:
• Appropriations from DEEWR
• Private grants and bequests
3/23/2016
Example
The University receives appropriation money
from DEST which is to be disbursed to Uni
NSW.
The funds received from DEEWR by the
University are not subject to GST.
Uni NSW will need to raise a GST tax invoice
for the transfer from Uni Sydney.
Uni Sydney is entitled to a GST input tax
credit.
3/23/2016
Example
The University receives grant money from
ARC – advice from ARC that these grants are
not subject to GST
NHMRC grants are not subject to GST
Remember we receive RCTI’s from NHMRC
3/23/2016
Question 2
How do we know if a course
charge is GST-free?
3/23/2016
GST Free Education
• GST Ruling 2000/27 Adult and Community Education
• GST Ruling 2001/1 Tertiary Education Courses
• GST Ruling 2003/1 Trade and Professional Courses
3/23/2016
GST Free Education
• Fee for Tertiary Education Course (“TEC”)
• Admin services related to a TEC
• Not Accommodation or Lease of Goods
associated with a TEC
• Excursions or field trips related to a TEC
– but not food and accommodation
3/23/2016
Education Courses
• Tertiary
– Bachelor, Master and Doctor
• Adult and Community
– can be offered by a University
– adds to employment related skills
• Professional or Trade
• Tertiary Residential College
3/23/2016
Tertiary Education Courses
What are administrative services?
•
Includes in the view of the Taxation Office:
– program changes
– enrolment services, including the processing of late enrolments
– late issue or replacements of student cards
– examination arrangements and assessments of students including re-assessment of results
where a student has failed
– processing academic results including duplicate degree copies
– overdue charges or late payment charges
– record-keeping
– administration of the library
– administration of a textbook scheme
– administration of the supply of course materials
– graduation certificates
– course reinstatement
– charges for HECS statements
3/23/2016
Tertiary Education Courses
What are NOT administrative services?
– Student hall application fees
– Foreign student application fees
– Graduation dinner
– Hire of academic dress
3/23/2016
Question
The University of Sydney is providing On-line writing
support in English for students at University of Hong
Kong?
Is the supply subject to GST?
Where services are being provided to a non-resident
who is not in Australia and the effective use/enjoyment is
outside Australia, the supply is not subject to GST. It is
treated as a export of services.
Question
If the University is to assemble an equipment in
Australia for an overseas client will the supply be
subject to GST?
The supply for consideration would not attract
GST because the effective use or enjoyment is
not within Australia even though the goods have
been assembled in Australia.
Question
University hosts a career development day for students.
An external organisation agrees to donate some funds to
the Uni provided they are allowed to set up a stall for
their marketing purposes.
Is it subject to GST?
Donations with material benefit by the donor is subject to
GST. If the donor was not receiving a material benefit
then GST would not apply. But in this instance the donor
is receiving a material benefit.
Question
Food and drink provided at a staff function
is generally funded from staff contribution.
However in some instances University
may make some contribution.
Is the University contribution subject to
FBT?
The University contribution is subject to
FBT.
For more information
• GST - http://www.finance.usyd.edu.au/docs/GSTguide.pdf
• FBT - http://www.finance.usyd.edu.au/docs/fbt_guide.pdf
• FBT (summary)
- http://www.finance.usyd.edu.au/docs/entertainment.pdf
IF IN DOUBT
Contact Nilesh Chand
9351-4396
nchand@finance.usyd.edu.au
3/23/2016