FBT compliance is a serious business with harsh penalties for failure to report or wreckless record keeping. Robson Partners Client Service Manager, Emilie Pearson looks at the 2 main methods to assist SME owners regarding entertainment expenses.

The two main methods of entertainment FBT calculation are – the Actual Method and the 50/50 Split Method.

Using the Actual Method you look at each expense individually to determine:

• If the expense can be considered minor (less than $300) and infrequent

• Who the expense benefited and the amount attributable

The Actual Method is very effective as the ability to disregard amounts less than $300 covers many of the small expenses, but it can be quite time consuming if you have a large number to sort through.

Under the 50/50 Split Method, all entertainment amounts go in the pot. This means that 50% of this amount becomes the taxable value of the entertainment fringe benefits provided. However, by using this method you lose the ability to apply the minor and infrequent exemption – in other words, one in – all in.

It’s worth considering which method will best suit your business in terms of resources and FBT liability minimisation.