What’s the Deal With Entertaining, Meals and Fringe Benefit Tax?
Let’s talk about everyone’s favourite topic – food! Specifically, meals that you provide to your clients or employees. We all know that treating your clients or rewarding your employees with a nice meal can go a long way in building business relationships and boosting morale. But, have you ever wondered if the cost of these meals is tax deductible? We bet yes.
What falls under Meal Entertainment?
The answer to the above depends on whether the meal falls under the category of “Meal Entertainment”. This includes providing entertainment by way of food or drink, accommodation or travel related to such entertainment, or reimbursing expenses incurred by employees for the above.
So, if you’re taking your employees out for an elaborate lunch or meeting clients at a restaurant, these costs are considered Meal Entertainment.
The catch? If you want to claim a tax deduction and GST credit, you’ll need to pay the appropriate amount of Fringe Benefits Tax (FBT). Otherwise, no deduction is allowed, and the GST cannot be claimed.
What falls under Sustenance?
But don’t worry, not all food-related expenses fall under Meal Entertainment. Sustenance, which is food or drink that is not in the nature of entertainment, is tax deductible and GST credits are claimable. This includes things like morning and afternoon teas, meals on premises provided during meetings or training, or meals consumed while on overnight travel.
Any other food and entertainment FBT exemptions?
There are also some exemptions available that can reduce or eliminate the FBT liability. The most common exemption is the Minor and Infrequent Exemption, which applies when the GST inclusive cost of the benefit is less than $300 per person and the benefit is not provided frequently. For example, taking an employee out to lunch to reward high performance would likely be exempt.
However, be aware that if you provide elaborate meals on your premises, such as Friday night drinks or Christmas parties, these may be considered entertaining and could potentially affect your tax deduction.
There you have it – the ins and outs of providing meals for your clients and employees. Remember, if you have any questions about your tax liabilities, it’s always a good idea to consult with your trusted advisor. Now, who’s hungry?