Non-Profit Organisations: How FBT applies to food and drink

What is entertainment?

Providing entertainment means:

• providing entertainment by way of food, drink or recreation

• providing accommodation or travel in connection with such entertainment.

Non-profit organisations, may, from time to time, provide their employees and/or their associates with food and drink, gifts, and possibly leisure activities. This may happen in a variety of circumstances and in relation to a number of different employees and/or their associates.

If these events are sometimes provided for staff in your organisation, you will need to know whether they may be classified as entertainment and incur a fringe benefits tax (FBT) liability.

What is recreation?

Recreation includes amusement, sport and similar leisure time activities, for example, a game of golf, theatre or movie tickets, a joyflight or a harbour cruise.

Is the food and drink entertainment?

To determine whether food or drink provided to a person is entertainment, you need to look at the following factors. None of the factors on their own will determine if the food and drink provided is entertainment, but (a) and (b) are considered the more important factors.

Where your employees are required to attend work functions as part of their employment duties, you will need to examine the circumstances of the situation and what duties are being performed to determine if entertainment has been provided. The fact that an employee is required to attend a function does not mean that entertainment has not been provided.

	Factors to Consider	Explanation
A	Why is the food or drink being provided?	Are you providing the food or drink for employees: to complete the working day in comfort, or to enjoy themselves? Providing refreshments to enable the employee to complete the working day in comfort is not generally entertainment. Providing food or drink in a social situation where the purpose of the function is for employees to enjoy themselves is likely to be entertainment
B	What type of food or drink is being provided?	The more elaborate a meal, the more likely it becomes that entertainment arises from eating the meal.
C	When is the food or drink being provided?	Food or drink provided during work time, during overtime or while an employee is travelling for work is less likely to be entertainment. This is because in the majority of these cases, the food or drink is provided for a work-related purpose rather than for an entertainment purpose.
D	Where is the food or drink being provided?	Food or drink provided on your business premises or at the employee's usual workplace is less likely to be entertainment. Food or drink provided off your business premises, such as at a function room, hotel, restaurant or consumed with other forms of entertainment, is more likely to be entertainment.

Circumstances in which food or drink provided (either on or off business premises)	Meal Entertainment Y/N	FBT Arises? For employees Y/N	FBT Arises? For associates Y/N	FBT Arises? For clients Y/N
At a social function (eg a staff Christmas party)	Yes	Yes	Yes	No
In an in-house dining facility (not at a social function)	No	No	Yes	No
In an in-house dining facility (at a social function)	Yes	Yes	Yes	No
Morning and afternoon teas and light lunches	No	No	Yes	No
At a social function or business lunch	Yes	Yes	Yes	No
Employee on business travel overnight and dining by themselves or with an employee, employee of an associate or client who is also on business travel overnight (regardless of who pays)	No	No	Yes	No