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Salary packaging is extended to ACT Government employees at the discretion of Ministers and can be withdrawn or changed in line with changes in the Fringe Benefits Tax Assessment Act 1986 (FBTAA).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 ”

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 outlets or chain/franchise outlets (eg McDonalds, Hungry Jacks, KFC, , pie shops, Nandos, , 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 (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. , 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, , 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 (e.g.

Bakers Delight and ) X

Fresh Fruit, Groceries and Meat

Fruit and vegetables purchased from a green grocer or meat from a butcher to X cater for a private function

Groceries (e.g. Woolworths, Coles,

CostCo, Aldi etc) X

Travel

Taxi travel to and from dinner X

Air, bus or train travel to meal X

Travel by private motor vehicle to attend meal entertainment X

Other

Separately identified meal cost incurred in conjunction with theatre tickets,  movie tickets or similar with meal

Meals whilst on holiday  Where in accordance with the guidelines for meal entertainment

Page 5 of 13 Expenditure Meal Entertainment

Meals as part of a holiday package / cruise etc  Where meal component is itemised separately

on an invoice and meets the meal entertainment criteria.

Frequently asked Questions and Answers

Are light meals, sustenance and refreshments meal entertainment?

No. Light meals, sustenance and refreshments do not have the characteristics of meal entertainment. It is not the provision of entertainment to provide light meals, sustenance or refreshments.

What is elaborate meal entertainment? A minimum of $15 per head is required to begin determining whether or not the meal has the characteristic of elaborate. As per TR 97/17 entertainment is defined as ‘hospitable provision for the wants of a guest.’ The four tests outlined on page 2 (why, what, when and where) need to be objectively assessed together with the guidelines to determine if elaborate meal entertainment has been provided.

Can I use my meal entertainment card to purchase fast food, take away or convenience food? No. Fast food, take away or convenience food is not allowed (guideline 4, page 3).

Are meals and drinks consumed as part of a significant function meal entertainment? Yes. Where the card holder pays for all meals and drinks at a significant function and no reimbursement is received from any guest. Yes. Where the card holder pays for all meals at a significant function and no reimbursement is received from any guest. No. Where the card holder pays only for the drinks at a significant function and no reimbursement is received from any guest.

Can I claim or use my meal entertainment card to pay for travel costs when I travel to attend meal entertainment? No. Travel in connection with meal entertainment is not allowed as per guideline 9.

I am hosting a party at my home, there are nine guests attending and the function is prepared by a professional caterer, the total cost is $250. Can I pay for the food costs and drink purchased from the liquor stores on my meal entertainment card? Yes. Meal entertainment is required to be elaborate enough to take on the characteristics of meal entertainment as per TR 97/17. It has determined that where meal entertainment is a minimum of $15 (guideline 3, page 3) per person then the meal is allowable. A professional caterer has also prepared the meals.

Yes. Alcohol purchased must be consumed in conjunction with the meal

Page 6 of 13 I am attending a BBQ at my friend’s home. Can I pay for the purchase of food and drink purchased from grocery and liquor stores on my meal entertainment card? No. Your friend is hosting the meal entertainment and self catering is not an eligible meal entertainment expense.

I am hosting an afternoon tea to celebrate my friend’s birthday at a tea house. The cost per person is $20 which pays for coffee/tea and cake. Can I pay for the bill using my meal entertainment card? No. Coffee and cake does not meet the criteria for meal entertainment.

Can I use my meal entertainment card to pay where the meal entertainment is less than $15 per person? No. The ACT Government has determined that where meal entertainment is less than $15 per person (guideline 3, page 3) then the meal is not claimable under meal entertainment.

Are meals consumed during working hours or whilst travelling for work meal entertainment? No. Meals consumed during working hours or whilst travelling for work, do not meet the criteria for meal entertainment.

John entertains guests at a restaurant. The charge per person is greater than $25 per head. John attempts to pay for the meal with his salary packaged meal entertainment card. Payment is declined due to insufficient funds. Can John lodge a manual claim for the meal entertainment? No. Insufficient funds (see guideline 1) have been salary packaged to the meal entertainment card and the restaurant offers debit card facilities.

Indy and her brother Bazza, take turns in providing an evening meal to each other’s family several times a week. Both Indy and Bazza work in positions where they are meet the eligibility criteria for a meal entertainment card. Can Bazza or Indy pay for these meals using their meal entertainment cards? No. Meal entertainment in the home is allowable for private social functions only and the meal must be provided by a professional caterer (guideline 7, page 3). Providing regular evening meals to family does not meet this criterion.

How do I know the merchant category name for the establishments I frequent? Who determines the category of businesses? What happens if the merchant code is blocked at the eating place I am dining at? Your MEVH statement states below the purchase the merchant category of the business.

The merchant code registered by the business is selected by the business owner. Refer to the Merchant code fact sheet for unblocked merchant codes.

When the employee tries to pay for a MEVH event and the payment declines due to a blocked merchant code the employee must pay their bill through other means. No manual reimbursement will be processed.

ENTERTAINMENT FACILITY LEASING EXPENSES (also known as VENUE HIRE - VH)

Page 7 of 13 What are Venue Hire Expenses?

Subsection 136(1) of the FBTAA defines ‘entertainment facility leasing expenses as;

Expenses incurred by a person in hiring or leasing

(a) a corporate box; or (b) boats, or planes, for the purpose of the provision of entertainment; or (c) other premises, or facilities, for the purpose of the provision of entertainment; but does not include so much of any such expenses that:

(d) is attributable to the provision of food or drink; or (e) is attributable to advertising

Determining venue hire expenses:

• a hire expense within its natural meaning of ‘to engage the temporary use for payment’; or • a leased expense as defined in s136(1) of the FBTAA, as ‘let on hire under an agreement other than a hire-purchase agreement’; or • a premises or facility within the context of s 152B as “applied to leasing or hiring costs of corporate boxes and other similar hospitality arrangements; or • The purpose of the hire or leasing of facilities must be the provision of entertainment.

Venue Hire Expense Guidelines

1. Venue Hire benefits can only be accessed by using a salary packaged Meal Entertainment and Venue Hire card.

2. No manual venue hire claims will be processed by Shared Services.

3. Secondary cards can be issued on the employee account number but split packaging to separate spouse or family member’s cards will not be allowed.

4. Holiday accommodation must relate to your immediate family only being spouse/partner, children, parents and siblings. The employee must not be on rostered duty or work related travel when utilising the benefit.

5. Tax invoices to substantiate the venue hire purchase must be in the employee’s name.

6. Cruises can be purchased using the MEVH card, provided that only immediate family including the employee occupy the entire cabin. A booking confirmation showing passenger names is required as proof along with a valid tax invoice that displays one non itemised charge only.

7. All inclusive holiday packages can be purchased using the MEVH card, provided that the holiday is for the employee and accompanying immediate family members only. Immediate family consists of your spouse or child. A booking confirmation showing passenger names and a brochure confirming that the package is all inclusive is required. Travel itineraries must be kept as proof of travel. This does not include holiday packages put together by a travel agent, where the agent purchases various elements and packages them.

8. Employees are required to maintain itemised receipts associated with purchases made on their MEVH card. All receipts are required by the Australian Taxation Office (ATO) to be in English and itemised in detail showing time, date and details of purchases and clearly identify who the payment was made to. Where original receipts are in a foreign language, they are

Page 8 of 13 required to be translated by an approved commercial translator. The cost of translation is to be borne by the employee and cannot be packaged.

9. All receipts are to be kept for 5 years after the transaction date, as required by the ATO.

10. In the event of an audit receipts will be requested. It is expected that employee’s 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 FBT, penalties or interest, employees will be liable to reimburse the ACT Government.

11. Disciplinary action, including cancellation of the MEVH card may be applied where breaches of guidelines are identified.

12. Where the MEVH card is inadvertently used for purposes other than EFLE, you should contact the Tax and Salary Packaging Team to arrange corrective action, including repayment of the amount from post tax dollars.

Entertainment Facility Leasing Expense Checklist

Expenditure Entertainment Facility Leasing Expense

Venue/Function Room Hire Yes No

Hire of a reception centre or function

room for an entertainment event 

Hire of a marquee for entertainment

event 

Hire of an entire boat for the purpose

of an entertainment event 

Hire of an entire corporate box (must be separate from the general seating  area)

Seats at a sporting event in the general seating area X

Seats at a movie theatre or theatrical event X

Holiday accommodation only for the employee and accompanying family members Hire a holiday home  Hire a motel room 

Page 9 of 13 Expenditure Entertainment Facility Leasing Expense

Hire a room or unit in a holiday resort  Bed and breakfast stay 

On-site caravan, cabin, mobile home or camping ground site fee 

Annual caravan site fee X Serviced self contained unit  Houseboat or yacht in its entirety 

Time Share accommodation (not the purchase of time share or annual  fees)

Cabin on a cruise ship for employee and immediate family members only 

Travel

Seat on a plane X

All inclusive holiday package including airfares, accommodation and specific tours and meals (substantiated by a brochure and invoice with the named  passengers from a travel agent – it is not created by a travel agent or individual)

All inclusive holiday package including airfares, accommodation and specific tours and meals created by a travel agent (substantiated by an invoice X with the named passengers, flights, accommodation and tours)

All inclusive holiday package that includes additional recreational or X educational activities (e.g. golf, skiing, language, cooking)

All inclusive holiday package that includes accommodation and a show X

Page 10 of 13 Expenditure Entertainment Facility Leasing Expense

Travel by private motor vehicle to holiday destination X

Questions and Answers

Can a cruise be booked and paid for directly with a Cruise Company?

Yes. All inclusive cruises are allowable under the MEVH benefit, where a valid tax invoice displaying one non-itemised charge is presented. The expense should be paid for the employee’s MEVH card.

Can I package a holiday that my travel agent has put together for me? No. Only all inclusive holiday packages through a travel agent, can be purchased on the MEVH card.

I am hiring a marquee for the purpose of entertaining family and friends at a birthday celebration. Can I use my MEVH card to pay for the hire of a marquee?

Yes. The MEVH card can be used to pay for the hire of the marquee as its purpose was the provision of entertainment.

Meal Entertainment and Venue Hire (MEVH) Card

In order to access the MEVH benefit, it is mandatory that an employee applies for, obtains and salary packages amounts to a MEVH card. Where an employee does not comply with this, the benefit is not available to them.

MEVH cards through Westpac are available to eligible employees (see MEVH Factsheet for application details). An allocated amount per fortnight is required to be deducted from pre-tax salary and sent directly to the employee’s meal entertainment card.

All purchases made using the card must be in line with the MEVH guidelines, set out above. Audits on card purchases will be conducted by your Directorate on an annual basis. Any unauthorised use of the card may result in disciplinary action and/or the cancellation of your meal entertainment card and liability to pay FBT on the transaction.

Card balances can be obtained using an ATM, however cash withdrawals are not permitted at any time. Balances and statements for the card will also be available using an online service. Instructions on how to access this facility will be provided when the MEVH card is provided to you.

Once the card is activated, employees will need to wait until funds have been directed to the account prior to purchasing any meals or beverages. Funds will usually be available for access within 24-48 hours of the next available pay day. There will be no overdraft facility available on the card and any transactions that exceed the current balance of funds in the account will be declined.

Employees may vary the amount that is deducted from their fortnightly salary for their meal entertainment card at any time by completing a new MEVH form. Variation requests will be processed in the next available pay day.

Page 11 of 13 If an employee wishes to cancel their MEVH card, they will need to advise the Shared Services Taxation and Salary Packaging Team in writing. The employee must surrender their card to the Shared Services Taxation and Salary Packaging Team, who will cease salary packaging deductions and immediately cancel the card. Any balance remaining on the card, once received from the bank, will be repaid through the payroll system and taxed at the employee’s marginal PAYG rate.

In the event that an employee transfers from an FBT Exempt-Benefit status position to a Full-FBT position, the employee is required to advise Shared Services Taxation and Salary Packaging. The Shared Services Taxation and Salary Packaging Team will cancel the employee’s MEVH card and deductions immediately upon receiving this advice. This is to ensure employees do not unintentionally incur an FBT liability. Any balance remaining on the card will then be refunded to the employee through payroll and taxed at the employee’s marginal tax rate.

Where an employee fails to advise that they have transferred to a non exempt position, any expenditure incurred on the meal entertainment card, from the date of transfer, will not be exempt from FBT and may result in an FBT debt being incurred and an increased Reportable Fringe Benefits Amount reported on the employee’s payment summary.

Details of the fees associated with each card are outlined in the relevant application and supplementary forms. To enquire or apply for a MEVH card, employees should contact the Taxation and Salary Packaging Team on phone number 6207 9000 or via email to [email protected]

Employee Obligations:

In the event that Shared Services is audited or investigated by: a) A department or authority of an Australian federal, state or territory government; b) any qualified accountant, auditor, actuary, barrister, solicitor or similar professional;

causing Shared Services to pay or rectify:

c) an underpayment of any excise, duty, levy, fee, charge, impost or cost; or d) a failure by Shared Services to meet any of its legal and statutory requirements,

and the origins of such underpayment or failure can be traced back to:

e) failure or refusal by the employee to provide Shared Services with the correct information with regard to his or her salary package;

f) any plan, scheme, arrangement or action taken or entered into by the employee with respect to his or her salary packaging that Shared Services would not have authorised, had Shared Services been fully aware of all the circumstances of such plan, scheme, arrangement or action; or

g) any action taken or failed to be taken by the employee with respect to individual components of the employee’s package,

there shall be immediately applied to the affected employees package, an adjustment equal to the additional amount imposed on Shared Services, including any penalties*, that are reasonable attributable to that employee because of paragraphs (e), (f) and/or (g) above.

*Note: Penalty includes any, or further, charge, cost, excise, fee, fine, interest, impost, levy, payment, pecuniary, penalty or punishment, premium, taxation, additional taxation, or similar expense, imposed upon the Employer pursuant to any Australian federal, state or territory law, and includes

Page 12 of 13 the loss of a benefit or advantage to Shared Services, but does not mean a “penalty” as defined in the Fair Work Regulations.

Guidelines are based on taxation legislation to which the ACT Government is required to comply with. Where legislative changes are made the guidelines will be amended and any changes will be communicated to all employees by Shared Services Taxation and Salary Packaging team.

Where claims are disputed, taxation legislation, rulings and pronouncements will take precedence over the guidelines, in determining outcomes.

Page 13 of 13