Salary Packaging – Meal Entertainment and Entertainment Facility Leasing Expense (MEVH) Guidelines
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Salary Packaging – Meal Entertainment and Entertainment Facility Leasing Expense (MEVH) Guidelines Overview Salary packaging is extended to ACT Government employees at the discretion of Ministers and can be withdrawn or changed in line with changes in the Fringe Benefits Tax Assessment Act 1986 (FBTAA). Salary packaged Meal Entertainment and Entertainment Facility Leasing (MEVH) benefits are available to eligible ACT Government employees who qualify for the Fringe Benefits Tax (FBT) exemption under 57A of the FBTAA where; • “the duties of employment of the employee are exclusively performed in, or in connection with a public hospital; or • the employer provides public ambulance services or services that support those services and the employee is predominantly involved in connection with the provision of those services” Employees who meet these criteria under s 57A of the FBTAA are exempt from paying FBT on benefits under the $17,667 grossed up exemption cap. Subsection 5B(1L) of the FBTAA further provides that MEVH expenses is in addition to the grossed up exemption amount of $17,667. On 12 May 2015 the Federal Government announced changes to the existing rules governing meal entertainment and venue hire (MEVH). The changes will take effect from the start of the 2016-17 FBT year, ie from 1 April 2016. The previous uncapped entitlement for each benefit will be replaced with a combined pretax amount of $2,550 (or $5,000 per annum when grossed up). Amounts in excess of this will attract FBT, unless they are able to be offset against an unused portion of another FBT concession. From 1 April 2016 all amounts of Salary Packaging MEVH, regardless of their FBT status, will appear on the employees’ payment summary as a reportable fringe benefit amount (RFBA). As the Australian Taxation Office (ATO) treats RFB amounts as income when calculating liability for child support payments and Medicare levy surcharges (among others), the changes may affect your liability for these charges. MEAL ENTERTAINMENT What is Meal Entertainment? ACT Government Shared Services Level 3, Winyu House, 125 Gungahlin Place, Gungahlin ACT 2912 GPO Box 158 Canberra ACT 2601 Meal entertainment is defined in s 37AD of the FBTAA as “entertainment by way of food or drink” The definition of ‘entertainment’ contained in section 32-10 of the Income Tax Assessment Act (ITAA) 1997, and adopted by the FBTAA, does not prescribe that entertainment occurs on every occasion food or drink is provided. That is, not every meal consumed will be ‘meal entertainment’. Taxation Ruling TR 97/17 (TR 97/17) sets out the objective analysis required. Determining Meal Entertainment The determination of whether or not the provision of food and drink constitutes the provision of entertainment requires an objective analysis of all the circumstances of the provision of the entertainment. The Australian Taxation Office (ATO) considers that the following factors, as set out in TR 97/17 are relevant: (a) Why is the food or drink being provided? This test is a ‘purpose test’. Refreshments and sustenance does not meet the purpose test. The choice of restaurant and menu choices need to have the character of entertainment. (b) What type of food or drink is being provided? Morning and afternoon teas and light meals are not considered to constitute entertainment. As 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. (c) When is the food and drink being provided? Food and associated drink provided during work time, during overtime or while the employee is travelling is less likely to have the character of entertainment. Meals eaten during working hours are not eligible to be claimed as meal entertainment. (d) Where is the food and drink being provided? Food and associated drink provided in a function room, hotel or restaurant or consumed with other forms of entertainment is more likely to have the character of entertainment. The ATO considers that none of the individual factors will be determinative, however (a) and (b) are considered the more important issues to consider. The following types of food or drink expenses do not amount to meal entertainment; a) Morning and afternoon teas; b) Light meals provided without alcohol, which would include takeaway or eat in meals purchased from fast food outlets or chain/franchise outlets (eg McDonalds, Hungry Jacks, KFC, Red Rooster, pie shops, Nandos, Subway, Grill’d, Kingsleys, Sushi Train, general stores), but not limited to these establishments; c) Food or drink consumed in the course of overnight business travel; d) Food or drink that is consumed during working hours or overtime periods; Page 2 of 13 e) Beverages that are not in connection with a meal; and f) Ancillary costs associated with private functions such as a band, decorations etc. Meal Entertainment Guidelines Meal entertainment expenses should meet the objective tests outlined in TR 97/17 and Taxation Ruling IT 2675 and the following guidelines: 1. Meal entertainment benefits can only be accessed if you have been issued a meal entertainment card and the card must be used to purchase meal entertainment. 2. Meals and drinks (including those of guests of the employee) do not have to be related to their employment or their positions held within the ACT Government but must be for two or more people. The primary card holder must be present during the provision of the meal entertainment. 3. A minimum transaction amount of $15 per person per meal is required, that is the minimum card expenditure is to be $30. This includes drinks provided in connection with an elaborate meal. 4. Card expenditure on the provision of convenience or take away meals, light meals, sustenance and meals from fast food chains or franchises is not allowed e.g. McDonalds, Hungry Jacks, KFC, Red Rooster, pie shops, Nandos, Subway, Grill’d, Kingsleys, Sushi Train, general stores etc, but not limited to these establishments, whether eaten in or taken away. 5. Food or drink consumed during working hours or overtime periods is not meal entertainment and cannot be purchased on a meal entertainment card. 6. All alcoholic beverages must be consumed in conjunction with an elaborate meal that satisfies the criteria for determining meal entertainment and purchased using the meal entertainment card. 7. All meal entertainment in the home must meet the meal entertainment guidelines. Meal entertainment in the home must be for a celebration or a private function. The meal must be provided by a professional caterer. 8. Merchant Code blocks have been implemented to assist with tax compliance of purchases. Refer to the MEVH Merchant Code Guidelines. 9. Travel in connection with meal entertainment is not allowed. This includes air travel, bus travel, taxi fares and the use of private motor vehicles. 10. Employees are required to maintain itemised receipts associated with purchases made on their MEVH Card. All receipts are required by the ATO to be in English and itemised in detail showing time, date, details of purchases and clearly identify the restaurant/cafe/function centre/caterer. Where original receipts are in a foreign language, they are required to be translated by an approved commercial translator. The cost of translation is to be borne by the employee. Receipts for meal entertainment must only contain items relating to the instance of meal entertainment. Mixed receipts are not allowed. 11. All receipts are to be kept for 5 years after the transaction date, as required by the ATO. Page 3 of 13 12. In the event of an audit, receipts will be requested. It is expected that employees will be able to provide relevant proof of payment to substantiate that all purchases made on their card meet the guidelines. Where sufficient evidence is not provided and the ACT Government is assessed with additional Fringe Benefits Tax (FBT), penalties or interest, employees will be liable to reimburse the ACT Government. 13. Disciplinary action, including cancellation of the meal entertainment card may be applied where breaches of guidelines are identified. 14. Where the meal entertainment card is inadvertently used for purposes other than meal entertainment, you should contact the Shared Services Tax and Salary Packaging Team to arrange corrective action including repayment of the amount from post tax dollars. 15. Secondary meal entertainment cards may be issued. However, they need to be attached to the same account and splitting of packaged amounts between cards is not permitted. Note: The anti avoidance provisions of s 67 of the Fringe Benefits Tax Assessment Act 1986 apply where an arrangement is entered into with the sole or dominant purpose of obtaining a tax benefit. This provision allows the Commissioner of Taxation to undo a transaction and apply FBT as if the arrangement had not been entered into and the amount will not be exempt from FBT. Meal Entertainment Checklist Expenditure Meal Entertainment Yes No Food and drink consumed at a hotel Food and drink consumed at a restaurant Food and drink consumed at a function room Food and drink consumed at a corporate box Food prepared for a private function at employees home prepared by professional caterers Food prepared for a private function at employees home not prepared by X professional caterers – grocery receipts Light meals without alcohol e.g. sandwiches, croissants, soup, salad, X pies, pizza, bacon and egg rolls etc Fast Food and Take-away – Convenience No. Considered sustenance and Food not meal entertainment Page 4 of 13 Expenditure Meal Entertainment Convenience food, whether dine in or take-away (eg but not limited to McDonalds, Grill’d, KFC, Hungry Jacks, X Sushi, Pizza Hut, food court vendors) Alcohol Alcohol consumed at a bar/hotel with food When consumed as X when consumed with light part of a meal which bar snacks or meals eg burgers, meets the guidelines chips, spring rolls etc Purchase of alcohol from a liquor store When consumed as part of a meal which meets the guidelines Bakeries Food purchased from bakeries (e.g.