CHECKLIST
Before it can be decided on whether provision of food and drink constitutes entertainment the reasons for providing food and drink need to be analysed. Below are the questions that should be asked:
(a)Why is the food or drink being provided. This test is a ‘purpose test’. For example, food or drink provided for the purposes of refreshment does not generally have the character of entertainment, whereas food or drink provided in a social situation where the purpose of the function is for employees to enjoy themselves has the character of entertainment.
(b)What food or drink is being provided. As noted above, morning and afternoon teas and light meals are generally not considered to constitute entertainment. However, as light meals become more elaborate, they take on more of the characteristics of entertainment. The reason for this is that the more elaborate a meal, the greater the likelihood that entertainment arises from the consumption of the meal.
For example, when an employer provides morning or afternoon teas or light meals, that food or drink does not usually confer entertainment on the employee. By contrast, a three course meal provided to an employee during a working lunch has the characteristics of entertainment. The nature of the food itself confers entertainment on the employee.
(c)When is the food or drink being provided. Food or drink provided during work time, during overtime or while an employee is travelling is less likely to have the character of entertainment. This is because in the majority of these cases food provided is for a work-related purpose rather than an entertainment purpose. This, however, depends upon whether the entertainment of the recipient is the expected outcome of the provision of the food or drink. For example, a staff social function held during work time still has the character of entertainment.
(d)Where is the food or drink being provided. Food or drink provided on the employer’s business premises or at the usual place of work of the employee is less likely to have the character of entertainment; refer to the reasons in (b) and (c) above. However, food or drink provided in a function room, hotel, restaurant, café, coffee shop or consumed with other forms of entertainment is more likely to have the character of entertainment. This is because the provision of the food or drink is less likely to have a work-related purpose.
No one of the above factors will be determinative; however, paragraphs (a) and (b) are considered the more important. The application of the above factors results in the determination of whether the food or drink amounts to meal entertainment. Once this determination is made, the employer must then decide whether each item of actual expenditure on meal entertainment is to be treated individually under the ITAA and FBTAA or whether to elect that one of the methods contained in Division 9A of the FBTAA is to apply. If the election is made then the taxation outcome for the individual meal is no longer relevant.
MEAL ENTERTAINMENTCircumstances under which Food or Drink was provided / FBT
Applicable / Account
Code / GST
Code
Food or Drink consumed by employees on work premises
I. / At a social function / Yes / 2050 / GST
II. / Morning, afternoon teas and light lunches (without alcohol) / No / 2051 / GST
III. / Christmas party / Yes / 2050 / GST
IV. / Full meal e.g. 3 course meal / Yes / 2050 / GST
V. / Light meal e.g. 1 course meal provided when the purpose is not entertainment based e.g. working lunch (without alcohol). / No / 2051 / GST
VI. / Awards/Graduation
- finger food, no alcohol
- finger food, with alcohol
Consumed by associates # (e.g. family members) on work premises
I. / At a social function / Yes / 2050 / GST
II. / Morning, afternoon teas and light lunches / Yes / 2050 / GST
III. / Christmas party / Yes / 2050 / GST
IV. / Full meal e.g. 3 course meal / Yes / 2050 / GST
V. / Light meal e.g. 1 course meal / Yes / 2050 / GST
Consumed by clients/visitors (non employees or non associates)
I. / Must be a social function or meal / No / 2057 / INPUT
II. / Working lunch meeting on Flinders premises / No / 2051 / GST
Consumed off the work premises at a social function or business luncheon
I. / By employees / Yes / 2050 / GST
II. / By clients/visitors / No / 2057 / INPUT
III. / By associates / Yes / 2050 / GST
Consumed by employees whilst travelling
I. / Employee travels and dines alone / No / 2051 / GST
II. / Employees travelling and dining together / No / 2051 / GST
III. / Employee travelling with client and dining together / No / 2051 / GST
IV. / Employee dines with another employee, who is not travelling
- Travelling employee
- Non-Travelling employee
Employees dining together and not travelling
I. / Employee entertains himself and/or another employee / Yes / 2050 / GST
MEAL ENTERTAINMENT
Circumstances under which Food or Drink was provided / FBT
Applicable / Account
Code / GST
Code
Meal consumed whilst attending seminar
I. / Incidental to an eligible seminar * / No / 2051 / GST
II. / Light breakfast at a non-eligible seminar / No / 2051 / GST
III. / Light refreshments, including moderate amounts of alcohol provided at a non-eligible seminar / No / 2051 / GST
IV. / Clients/Visitors – for all of the above / No / 2051 / GST
Consumed by employees at promotions
I. / Function not held on employer’s premises and is open to the general public / Yes / 2050
Accompanying Spouses
I. / With employee travelling on business and employer pays for all meals
- Employee
- Spouse
# Associates An associate includes employee spouses, children or family members. An associate of the University includes any companies wholly owned by FlindersUniversity such as Flinders Consulting or any third parties which Flinders enters into a joint venture agreement.
Employees: Past, present and future employees are also “employees” for FBT purposes. A ‘reasonable’ effort must be made to determine who past or future employees of Flinders are.
* To qualify as an “eligible seminar”, the seminar must:
- Be a conference, convention, lecture, training session, or speech;
- It must have a continuous duration of 4 hours (excluding breaks);
- Business discussions in the normal course of business are not eligible, unless it is an exempt training seminar (see below);
- The sole or dominant purpose of the seminar must not be the promotion or advertising of the business; and
- The sole or dominant purpose must not be the provision of entertainment.
“Exempt training seminars” qualify as eligible training seminars where:
- The seminar is organized to discuss general policy issues; and/or
- To enable employees to discuss general policy issues relevant to the internal management of Flinders’ business; and
- The seminar is not held on premises of the University. It must be held on premises of a person whose business includes the organising of seminars or making premises available for those purposes.