GST/FBT - MEALS PROVIDED AT NO COST TO EMPLOYEES
27 January 2005
This article based on a recent ATO ID explains why there is no GST payable on the supply of meals to an employee and where the employee provides services for these meals.
The principles are best illustrated by referring to the facts of the case considered by the ATO:
An entity is an employer that is registered for GST.
The entity provides an employee (or an associate of the employee) with food and/or drinks. The food and/or drinks are supplied, for no charge, to the employee (or an associate of the employee).
The supply of the food and/or drinks to the employee (or an associate of the employee) satisfies the requirements of section 9-5 of the GST Act as being a taxable supply. The consideration provided for the supply of food and/or drinks is the employee's services.
The supply of the food and/or drinks to the employee (or an associate of the employee) is provided in respect of the employee's employment.
The supply of the food and/or drinks is a fringe benefit for the purposes of the GST Act, regardless of whether or not it is an exempt benefit under section 136 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).
Reasons
Section 9-70 of the GST Act provides that the amount of GST on a taxable supply is 10% of the value of the taxable supply.
Subsection 9-75(1) of the GST Act provides that the value of a taxable supply is the price x 10/11 and if the consideration for the supply is not expressed as an amount of money, or not only in money, the price of the supply is the sum of the amount of money, if any, and the GST inclusive market value of the consideration where the consideration is not expressed as an amount of money.
The consideration provided for the entity's taxable supply of food and/or drinks is the employee's services and as such, the consideration is not expressed as an amount of money. Therefore, the price for the supply is the GST inclusive market value of the employee's services.
However, the supply of food and/or drinks is a fringe benefit for the purposes of the GST Act and the way the value of a supply of a fringe benefit is worked out is different than for other supplies.
In working out the value of a supply where:
·
the consideration for the supply is not expressed as an amount of money, and
·
the supply is not a car fringe benefit
the price of the supply is the amount of consideration in the form of the recipients contribution made in the relevant tax period.
As such, in working out the value of the entity's taxable supplies of food and/or drinks, the price of the supply of the fringe benefit is limited to the amount of the recipients contribution.
The term 'recipients contribution' is defined includes any consideration paid in respect of a benefit that is an exempt benefit for the purposes of that Act. The term 'recipients contribution' is defined in relation to a fringe benefit, other than an expense payment fringe benefit, to mean the amount of any consideration paid to the provider or to the employer by the recipient of the benefit or the employee in respect of the provision of the recipient's property reduced by any reimbursement paid to the recipient in respect of that consideration.
Regardless of whether or not the supply is an exempt benefit under the FBTAA, the recipients contribution is limited to any consideration paid to the entity in respect of the provision of the food and/or drinks.
The entity provides the food and/or drinks to the employee (or an associate of the employee) for no charge. The consideration provided for the entity's supply is the employee's services. As there is no charge for the food and/or drinks, the employee (or an associate of the employee) has not made any contribution towards the cost of the food and/or drinks.
As the price of the entity's taxable supplies of food and/or drinks is limited to the amount of the recipients contribution and the employee (or an associate of the employee) has not made any contribution, the value of the entity's taxable supplies of food and/or drinks is zero.
Therefore, when food and/or drinks are supplied to an employee (or an associate of the employee) by the entity, for no charge, the amount of GST on that supply is calculated to be zero in accordance with section 9-70 of the GST Act.