NFPs should receive FBT relief for meal entertainment

The Coalition recently announced on 19 January 2025 the introduction of a capped tax deduction and fringe benefits tax (FBT) exemption for meal entertainment for small business. 

However, there was no consideration in that announcement for the not-for-profit (NFP) industry. 

It is our view that any such measure should also provide FBT relief for NFP organisations, not just for-profit businesses. In that case, further amendments would need to be considered to the FBT law specifically for NFPs. 

Understanding tax exempt body entertainment (TEBE)

A NFP entity typically provides meal entertainment to its staff members, which is deemed to be tax exempt body entertainment (TEBE) under the FBT law. This acknowledges that where the NFP organisation is exempt from income tax, a special category of fringe benefit applies to the provision of entertainment called TEBE. Broadly, this means that special rules apply to the valuation of entertainment for FBT purposes, including limited availability of the minor benefit exemption. 

We note that FBT exemption status can be granted to entities such as a public benevolent institution (PBI), and a health promotion charity (HPC). FBT-exempt organisations are already fully exempt from providing meal entertainment (except salary-packaged meal entertainment). 

Therefore, the main impact of the TEBE entertainment category for NFPs, rests on those NFPs that are income tax exempt and not considered FBT exempt. 

Proposed tax measures

The Coalition announcement in January 2025 proposed that a $20K capped tax deduction and corresponding FBT exemption be introduced for an initial two years. This will relate to business-related meal and entertainment expenses, provided to clients, vendors and employees and excludes alcohol. The proposed tax measure applies to small businesses with a turnover of up to $10 million. The implementation of this policy would depend on whether the Coalition wins the election and implements the measure as announced. 

BDO's call for amendments to FBT law for NFPs

BDO would like to see amendments made to the FBT law regarding tax exempt body entertainment and the minor benefit exemption so that NFP entities also benefit from any policy measures that provide for FBT exemptions for entertainment. 

While the elected government is considering amendments, we would also like them to address the erosion of the FBT exemption and FBT rebateable capping thresholds. An article in May last year raised this issue. These thresholds have been in place for over 10 years. Therefore, the real value of the FBT exemption and FBT rebate declines each year, and the threshold remains unchanged. 

Operating in the not-for-profit sector presents many challenges. Change is constant and the pressure to keep up with government policies, reporting standards and challenges from external forces can be a lot to manage. To help you on your journey, contact our not-for-profit advisory team.