The Federal Government is seeking to put into effect further 2015-16 Budget announcements that will impact Not-for-Profits from next year.
In October 2015, Parliament tabled several changes to the salary packaged arrangements that not-for-profit employers provide to employees for meal entertainment and entertainment facility leasing expenses (EFLE). These proposed changes are due to come into effect from 1st April 2016, impacting the 2016/2017 FBT year and beyond.
The proposed changes are:
- One separate grossed-up cap of $5,000 per employee for salary packaged meal entertainment and EFLEs will be introduced.
- The current reporting exclusion for meal entertainment and EFLEs will be removed. Instead it will appear as part of an employee’s reportable fringe benefit total included on their payment summary.
- There will no longer be access to elect the valuation method when valuing salary packaged entertainment benefits.
These proposed amendments will only apply to entertainment benefits that an employer provides to an employee as part of a salary packaging arrangement. If entertainment benefits are provided outside of a salary packaging arrangement, then the benefits will continue to be excluded benefits.
What is a salary packaged arrangement?
A salary packaging arrangement means an arrangement under which a benefit is provided to an employee if:
- The benefit is provided in return for the employee agreeing to a reduction in the employee’s salary or wages that would not have happened apart from the arrangement; or
- The arrangement is part of the employee’s remuneration package, and the benefit is provided in circumstances where it is reasonable to conclude that the employee’s salary or wages would be greater if the benefit were not provided.
The definition of ‘salary packaging arrangement’ will also be amended to ensure that it captures both benefits provided to employees and benefits provided to associates of employee.
The impact of the changes
Since the proposed amendments will remove the salary packaged entertainment benefits from being an excluded benefit, the grossed up taxable value of these benefits will be relevant in determining whether, and by how much, the applicable cap (i.e. $17,000 or $30,000) applying to FBT-exempt employers has been exceeded.
Salary packaged entertainment benefits for employees of these organisations will therefore be capped to a reportable $5,000 and any excess counted towards the more general caps of $17,000/$30,000 (depending on the employer).
In addition to the proposed caps, employers will not be permitted to use the elective valuation methods (ie the 50/50 split method and the 12-week register method) to determine the taxable value of salary packaged entertainment. Going forward only the actual valuation method will be available.
Please contact your local Accru adviser for advice on how this affects your salary packaging arrangements.