fbt and gst 24 june 2008 organised by the office of chief accountant
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FBT and GST 24 June 2008 Organised by the Office of Chief Accountant. 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 - PowerPoint PPT PresentationTRANSCRIPT
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FBT and GST
24 June 2008
Organised by the Office of Chief Accountant
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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
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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
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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
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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
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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
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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
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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.
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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
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Spendvision
• Correct use of classification codes
• Classification codes reflect Taxation Office administrative guidelines
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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!
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SOCIAL FUNCTIONS
Spouse/ Other
Entertainment? Employee family persons
On Premises YES FBT FBT -
Off Premises YES FBT FBT -
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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
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ExampleStaff 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?
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Coding – Social Function
Food & Drink Taxi to venue Other Costs
EmployeeMeal Entertainment
FBTMeal Entertainment
NO FBT/NO GSTEntertainment
FBT
FamilyMeal Entertainment
FBTMeal Entertainment
FBTEntertainment
FBT
Non Employee
Meal Entertainment NO FBT/NO GST
Meal Entertainment NO FBT/NO GST
Entertainment NO FBT/NO GST
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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
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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
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PROMOTIONS Spouse/ Other
Entertainment? Employee family persons
On Premises YES FBT FBT -
Off Premises YES FBT FBT -
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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
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Coding – PromotionsFood & Drink Other Costs
EmployeeMeal Entertainment
FBTEntertainment
FBT
FamilyMeal Entertainment
FBTEntertainment
FBT
Non Employee
Meal Entertainment NO FBT/NO GST
Entertainment NO FBT/NO GST
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BUSINESS DINNERS
Spouse/ OtherEntertainment? Employee family persons
On Premises YES FBT FBT -
Off Premises YES FBT FBT -
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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
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Coding - Business Dinners
Food & Drink
Employee Meal Entertainment FBT
Family Meal Entertainment FBT
Non EmployeeMeal Entertainment
NO FBT/NO GST
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BUSINESS TRAVEL
Spouse/ Other
Entertainment? Employee family persons
Off Premises NO - FBT -
YES FBT FBT -
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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
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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.
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ExampleTwo 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.
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ExampleTwo 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.
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ExampleA 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.
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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.
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Coding – Business TravelFood & Drink
Employee Travelling Travel Expense NO FBT
Employee Non Travelling Meal Entertainment FBT
Non Employee Travelling Other expense NO FBT
Non Employee Non TravellingMeal Entertainment
NO FBT/NO GST
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LIGHT MEALS OFF CAMPUS
Spouse/ Other
Entertainment? Employee family persons
Off Premises NO FBT FBT -
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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.
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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.
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Light meals off campus
THIS IS NOT MEAL ENTERTAINMENT!
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Coding – Light meals off campusFood & 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
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STAFF MEETING
Spouse/ Other
Entertainment? Employee family persons
On Premises NO - FBT -
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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
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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
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Coding – Staff MeetingsFood & Drink
Employee Business meetings NO FBT
Family Other payment FBT
Non Employee Other expense NO FBT
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AWARD PRESENTATIONS
Spouse/ Other
Entertainment? Employee family persons
On Premises NO - FBT -
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Award Presentations
• Large number of attendees. How do we apportion?
• A light meal served at an award presentation is not regarded as meal entertainment
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Coding – Award PresentationsFood & Drink
Employee Award Presentations NO FBT
Family Other payment FBT
Non Employee Other expense NO FBT
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TRAINING SEMINARS > = 4 HOURS DURATION
Spouse/ OtherEntertainment? Employee family persons
On Premises NO - FBT - YES - FBT -
Off Premises NO - FBT - YES - FBT -
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TRAINING SEMINARS < 4 HOURS DURATION
Spouse/ OtherEntertainment? Employee family persons
On Premises NO - N/A - YES FBT N/A -
Off Premises NO - N/A - YES FBT N/A -
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WORK RETREATS
Spouse/ Other
Entertainment? Employee family persons
Off Premises YES - FBT -
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Training SeminarsNot 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
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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!
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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
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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
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Coding - Training
Business Seminars FBT exempt
Remember that it is unlikely that food and drink served at seminars will be regarded as meal entertainment!
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Coding - Training
But what about dinner provided at an outside restaurant during the conference/retreat?
This is a social function
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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
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QUESTIONS
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Question 1
Please explain the GST treatment of grants and appropriations
received by the University
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Grants, Appropriations and Transfers
These are subject to GST:
• Transfer of funds from another Uni
• Grants from a private sector business
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Grants, Appropriations and Transfers
These are NOT subject to GST:
• Appropriations from DEEWR
• Private grants and bequests
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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.
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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
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Question 2
How do we know if a course charge is GST-free?
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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
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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
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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
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Tertiary Education CoursesWhat 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
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Tertiary Education Courses
What are NOT administrative services?
– Student hall application fees– Foreign student application fees– Graduation dinner– Hire of academic dress
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.
Question
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
