Movie vouchers – property versus tax exempt body entertainment fringe benefits
13 December 2009
The Tax Office advised that it considered ‘movie tickets’ and ‘vouchers to movie tickets’ as both being capable of constituting the provision of entertainment. The Tax Office noted that ‘movie tickets’ and ‘movie vouchers’ are terms used interchangeably in TR 97/12. That is, the heading to example 12 is movie vouchers – non-profit organisations. The example at paragraph 119 states that a ‘non-profit organisation that is a tax exempt body has provided an employee with 2 movie tickets ….’.
Whilst TD 94/55 only mentions 'theatre tickets' it is the principles outlined in TD 94/55 that must be applied to the provision of vouchers for movie tickets.
It is accepted that the provision of vouchers for movie tickets is the provision of property. However, as stated in TD 94/55:
In determining whether providing an item of property constitutes the provision of entertainment, regard should be had to all the circumstances of the case.
As further noted in TD 94/55, in practice, the provision of entertainment can be determined by reference to the characteristics of ‘timeliness’ and ‘direct connection’.
The Tax Office stated that the provision of vouchers for movie tickets is simply a more efficient way for employers to provide movie tickets to employees. Rather than specifying a particular movie or show that an employee must see, the employer is allowing the employee to make a choice of entertainment. It was also noted that the discussion and issue concerned a specific category of voucher which is only redeemable for a movie ticket.
On the 'timeliness' characteristic the Tax Office noted that:
* whilst a voucher needs to be exchanged for a movie ticket, the entertainment of the movie can occur immediately after that simple transaction
* there is no usefulness of the voucher after it has been used
* the voucher is not returned to the employer after use.
On the 'direct connection' characteristic the Tax Office noted that:
* whilst the voucher is exchanged for a movie ticket we do not consider that this breaks a direct connection between the voucher and the entertainment
* there is clearly an expectation that the outcome of the provision of a voucher for a movie ticket result in entertainment.
Accordingly, the Tax Office noted that it did not, in these circumstances, see a sufficient distinction between ‘movie tickets’ and ‘movie vouchers’ and both would constitute the provision of entertainment.