Two taxes combine to provide a knock-out punch

SADLY, the long lunch seems to have wound up some time ago. But wining and dining still play an important role in the media and marketing industries, although now more than ever the headache that follows has more to do with tax than wine.

Fringe Benefits Tax (FBT) presents advertising agencies with major administrative problems and, when combined with GST, the calculations become ever more involved.

The Brand Agency financial director Maria Florides said the agency tried to keep things very simple.

Initially developed to minimise the substantial entertainment expenses companies were able to claim, the situation now is fairly complicated.

“A lot of agencies also structure motor vehicles into sal-aries. When we had these sort of packages that attracted FBT the administration was just so much,” Ms Florides said.

If you only give employees cash, there’s no FBT involved.

BMoore Stephens BG tax partner Syd Jenkins said FBT was a “dog’s breakfast” this year, with the GST adding a further layer of compli-cation to the calculations.

“It’s complicated because you have to do it one way if GST is provided and another if GST is not, so potentially you’ve got twice the calculations as in the past,” Mr Jenkins said

“We find that, when we take on a new client, the FBT compliance is not good and it’s through ignorance. It becomes a very emotive issue because one of the most common forms are motor cars.

“Slowly but surely they (the Australian Taxation Office) have eroded benefits that exist. When I started there were real advantages to getting fringe benefits rather than salary.”

The calculation of FBT and enter-tainment has become so complicated that there is a push to have enter-tainment disallowed as a tax deduction because it’s almost unworkable.

Some sectors of the industry are calling for the ATO to either allow entertainment as a simple deduction or completely disallow it.

“The tax ruling on entertainment and FBT is 40 or 50 pages long. There was a clear abuse of entertainment in the past, but why is the solution worse than the abuse,” Mr Jenkins said.

‘The Government tries to keep it equitable but that just seems to breed complexity.

“The GST just adds another, perhaps almost the last, nail in the coffin. It’s just hopeless.”

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