Edited version of private ruling

Authorisation Number: 1011581016565

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Public Benevolent institution and Meal Entertainment

Question

Will the value of the reimbursement of restaurant meals provided to an employee be included in the employer's aggregate non-exempt amount?

Answer

No.

This ruling applies for the following period

1 April 2010 - 31 March 2011

The scheme commenced on

April 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it.

The fact sheet has more information about relying on your private ruling

You are a non-profit organisation and have been endorsed as a Tax Concessions Charity and Public Benevolent Institution (PBI) since 1 July 2000.

You intend to enter into an effective salary sacrifice arrangement (SSA) with your employees for the payment of restaurant meals of up to $100 per week.

The employees have already sacrificed their salary to the maximum allowed. That is, grossed up amount to $30,000.

The employees obtain invoices for the meals and are reimbursed by you.

ATO view documents

Fringe benefits tax: a guide for employers, NAT 1054-08.2006 (Chapter 6)

Taxation Ruling TR 97/17 Income tax and fringe benefits tax: entertainment by way of food and drink

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 5B(1D)

Fringe Benefits Tax Assessment Act 1986 Subsection 5B(1E)

Fringe Benefits Tax Assessment Act 1986 Subsection 5B(1L)

Fringe Benefits Tax Assessment Act 1986 Section 57A

Fringe Benefits Tax Assessment Act 1986 Subsection 123C(1)

Fringe Benefits Tax Assessment Act 1986 Subsection 123C(5

Fringe Benefits Tax Assessment Act 1986 Section 136(1)

Does Part IVA apply to this ruling?

Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.

We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA, go to our website www.ato.gov.au and enter 'Part IVA general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you understand how we reached our decision.

Question

Summary

The reimbursement of the restaurant meals will not be included in the employer's aggregate non-exempt amount, as the provision of meal entertainment benefits are excluded from an employee's individual fringe benefits amount and as such are not included in the calculation in your capping threshold.

Detailed reasoning

Section 57A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides that certain employers are generally exempt from fringe benefits tax on benefits provided to employees. Specifically subsection 57A(1) of the FBTAA states:

Where the employer of an employee is a public benevolent institution endorsed under subsection 123C(1) or (5), a benefit provided in respect of the employment of the employee is an exempt benefit.

Therefore as you are a public benevolent institution (PBI) benefits provided to your employees will be exempt benefits.

However, subsection 5B(1D) of the FBTAA provides that for PBIs, the employers fringe benefits taxable amount will include the employer's aggregate non-exempt amount.

The method for calculating the employer's aggregate non-exempt amount is contained in subsections 5B(1E) to 5B(1L). These subsections provide that a PBI will only be liable to pay fringe benefits tax on the amount the grossed-up value of the benefits provided to an individual employee exceeds $30,000.

However, not all benefits are included in the calculation. Under subsection 5B(1L) the calculation will not include benefits:

· that constitute the provision of meal entertainment

· that are car parking fringe benefits, or

· whose taxable values are wholly or partly attributable to entertainment facility leasing expenses.

In your situation you will be reimbursing your employees for the cost of restaurant meals.

Will the reimbursement of restaurant meals constitute meal entertainment?

The provision of benefits that constitute the provision of meal entertainment are exempt from FBT when provided by PBIs.

Providing meal entertainment means:

· providing entertainment by way of food or drink

· providing accommodation or travel connected with such entertainment, or

· paying or reimbursing expenses incurred by an employee for the above.

As you will be reimbursing the cost of the restaurant meals you will be providing meal entertainment.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).