FBT and Corporate Cards: Getting Your Entertainment Records Right
Meal entertainment on corporate cards is where many small business FBT questions start. The ATO gives you three ways to work out its taxable value, and which one you can use depends on the records you keep. Those records are far easier to capture when the expense happens than at 31 March.
The actual value method counts only what you spend on employees and their associates, so it needs records of who each meal was for. The 50:50 split method needs only your total spend, but counts half of everything, client meals included. The 12-week method needs a register of costs and recipients. Recording attendees and purpose when the expense happens keeps every option open.
The three ways to value meal entertainment
The ATO sets out three approaches (ATO: calculating the taxable value of entertainment-related benefits):
- Actual value method: the taxable value is the amount you actually pay. Only the entertainment for employees and their associates is subject to FBT, not entertainment for clients. If you cannot easily work out the spend on employees and their associates, you can apportion it on a per head basis.
- 50:50 split method: the taxable value is 50% of your total meal entertainment spend for the FBT year, for all people: employees, clients and others.
- 12-week method: you keep a register of meal entertainment, including costs and recipients, for a continuous 12 weeks. The percentage spent on employees and their associates is then applied to your total meal entertainment spend for the year.
The 50:50 split and 12-week methods are options for meal entertainment (food and drink, not recreation). If you choose one, you use it for all meal entertainment in the FBT year, which runs from 1 April to 31 March, and you make the choice by the day your FBT return is due. Both methods start from your spend on all meal entertainment for all people, including meals for clients and food and drink for employees on your premises.
Why your records decide which method works
The 50:50 split method is the easiest to support, because it only needs your total meal entertainment spend. The trade-off is that half of everything counts, including meals with clients that would not attract FBT under the actual value method. Whether that costs you more depends on your mix of employee and client entertainment.
The actual value method and the 12-week method both need to know who was there. The ATO's record-keeping examples include the date, whether each recipient is an employee, an associate or another person, the cost, the kind of entertainment and where it was provided. Without that information, the simplest method may be the only one you can support.
The 31 March reconstruction problem
In practice, many businesses try to piece this information together at or near 31 March. By then, cardholders do not remember who attended a dinner in July, the business purpose is vague or missing, and the cardholder who submitted the expense may have left the company.
Records written at the time of the expense are more reliable than records rebuilt months later from card statements and calendar invites. The information that would have supported a lower FBT figure often no longer exists in any reliable form.
How SpendGuard captures records at the point of expense
SpendGuard prompts the cardholder to record attendees and business purpose when they submit an entertainment or meal expense, not at month-end or year-end. Each transaction gets an FBT estimate as it posts, and the entries build up across the April to March FBT year. At year-end you have a register to give your tax agent rather than a reconstruction exercise.
Entertainment spend is only one of the patterns card monitoring looks for. Our piece on what corporate card misuse looks like covers the others: personal spend, split transactions and unapproved vendors.
FBT has exceptions. For example, the 50:50 split and 12-week methods cannot be used for entertainment provided under a salary packaging arrangement. Confirm the right method for your business with your tax agent.
Frequently asked questions
Which FBT method should we use for meal entertainment?
It depends on your mix of employee and client entertainment and on the records you keep. You can use the actual value method, or choose the 50:50 split or 12-week method for meal entertainment. Your tax agent can compare the options once you have the records.
What is the difference between the actual value method and the 50:50 split method?
The 50:50 split method makes half of all meal entertainment spend taxable, whoever attended. The actual value method counts only what you spend on employees and their associates, so it needs records of who attended.
How does SpendGuard capture FBT data at point of expense?
When a cardholder submits an entertainment or meal expense, SpendGuard prompts them to record the attendees and business purpose at that point, not two weeks later when nobody remembers. The entries accumulate across the April to March FBT year, so at year-end you have a complete register.
What does the SpendGuard FBT health check show?
Send us three months of corporate card exports as a CSV and we return a report showing an FBT exposure estimate for your entertainment and meal spend, along with policy breach counts, fraud risk flags, and new vendor exposure. No software to install, no commitment required. If you would rather start smaller, you can score your own card programme in two minutes, with no email address needed.
Is SpendGuard a software product or a managed service?
Managed service. SecureLoop operates SpendGuard: you do not manage the infrastructure, tune the detection rules, or maintain the integrations. You get the dashboards, alerts, and monthly review calls. Setup from $3,500 fixed price, running from $599 per month for up to 20 cardholders.
Get your FBT records right before 31 March
SpendGuard captures attendees and business purpose at the point of expense and builds an FBT register across the April to March year. Start with a free health check: send us three months of card exports and we will show you your FBT exposure estimate before you commit to anything.