FBT and GST 24 June 2008 Organised by the Office of Chief Accountant

1. FBT and GST 24 June 2008 Organised by the Office of Chief Accountant

2. 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 9/24/2014

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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.

9. 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

10. Spendvision • Correct use of classification codes • Classification codes reflect Taxation Office administrative guidelines

11. 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!

13. 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

14. 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?

15. Coding – Social Function

16. Coding – Social Function 9/24/2014 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

17. 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

19. 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

20. Coding – Promotions 9/24/2014

22. 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

23. Coding - Business Dinners

25. 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

26. 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.

27. 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.

28. 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.

29. 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.

30. 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.

31. Coding – Business Travel

33. 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.

34. 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.

35. Light meals off campus 9/24/2014 THIS IS NOT MEAL ENTERTAINMENT!

36. Coding – Light meals off campus 9/24/2014

38. 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

39. Staff Meetings 9/24/2014 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

40. Coding – Staff Meetings 9/24/2014

42. Award Presentations • Large number of attendees. How do we apportion? • A light meal served at an award presentation is not regarded as meal entertainment

43. Coding – Award Presentations 9/24/2014

47. 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

48. 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!

49. 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

50. 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