MEAL ENTERTAINMENT – CAN YOU CLAIM INPUT CREDITS
14 June 2007
Division 69 of the GST Act explains that items of expenditure which are non-deductible under the Income Tax Assessment Act 1997 (ITAA) do not give rise to creditable acquisitions under the GST Act, and relevant input tax credits cannot be claimed. Entertainment expenses are included as non-deductible expenses in this division.
However, subdivision 32-20 of the ITAA provides that if the entertainment is provided by an employer by way of providing a fringe benefit to its employees then the expense is an allowable deduction, even if that employer is a tax-exempt entity, and full input tax credits may be claimed.
Entertainment provided to an employee, or to an associate of an employee, by an income tax-exempt employer, which is provided in respect of employment, is a tax-exempt body entertainment benefit and is generally a fringe benefit and subject to FBT.
The taxable value of the benefit is the expenditure incurred in providing the entertainment to the employee/s in accordance with the particular calculation method used : the 50/50 split method or the 12 week register method. Tax-exempt employers may also choose to use the total cost of the expenses incurred in providing a benefit for their employees.
For instance, an employer is a tax-exempt, FBT registered employer and has chosen to claim 100 per cent of the expenses incurred in providing meal entertainment fringe benefits to its employees. The employees do not make any contributions towards the costs incurred by the employer in providing meal entertainment. The taxable value of the fringe benefit therefore is calculated on the actual expenditure incurred by the employer as a 'tax-exempt body entertainment fringe benefit' and full input tax credits are able to be claimed.