• 14.3 How to identify whether the provision of food or drink is entertainment

    In order to determine when food or drink provided to a person results in entertainment, you need to examine the circumstances surrounding that provision of the food or drink. You need to look at the following factors.

    (a) Why is the food or drink being provided?

    This is a purpose test. For example, food or drink provided for the purposes of refreshment does not generally have the character of entertainment, whereas food or drink provided in a social situation where the purpose of the function is for employees to enjoy themselves has the character of entertainment.

    (b) What food or drink is being provided?

    Morning and afternoon teas and light meals are generally not considered to be entertainment. However, as light 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 more likely it is that entertainment arises from consuming the meal.

    (c) When is the food or drink being provided?

    Food or drink provided during work time, during overtime or while an employee is travelling is less likely to be entertainment. This is because, in the majority of these cases, food provided is for a work-related purpose rather than an entertainment purpose. This, however, depends on whether the entertainment of the person is the expected outcome of the food or drink. For example, a staff social function held during work time still has the character of entertainment.

    (d) Where is the food or drink being provided?

    Food or drink provided on the employer's business premises or at the usual place of work of the employee is less likely to have the character of entertainment. However, food or drink provided in a function room, hotel, restaurant, cafe, coffee shop or consumed with other forms of entertainment is more likely to have the character of entertainment. This is because the provision of food or drink is less likely to have a work-related purpose.

    None of these factors on their own will determine if the food or drink provided is meal entertainment. However, (a) and (b) are considered the more important factors.

    What to do next

    If the benefit is...

    Then refer to...

    entertainment by way of food or drink

    section 14.4

    recreational entertainment

    section 14.10

    not entertainment

    section 14.17

    14.4 Do you provide food or drink that is entertainment?

    If you provide entertainment by way of food or drink you must:

    Step

    Action

    Section reference

    1

    Consider whether an exemption applies

    14.5

    2

    If no exemption applies, the entertainment may be a property, expense payment or residual fringe benefit

    14.6

    3

    Decide whether the benefit will be valued under the meal entertainment fringe benefit rules

    14.7

    4

    Keep the appropriate records

    14.13

    5

    If required, report an amount on the employee's payment summary

    14.14

    For examples of how the valuation rules apply, see section 14.9.

      Last modified: 09 Aug 2016QC 17828