Edited version of your private ruling

Authorisation Number: 1012573200556

Ruling

Subject: GST and meals provided to employees

Question 1

Are you entitled to an input tax credit for the purchase of meals provided to your employees whilst those employees are working at locations outside of your business premises?

Answer

Yes

Relevant facts and circumstances

· You are a sole trader and are registered for goods and services tax (GST).

· You are operating a service business which is based in a town in Australia.

· You employ staff to assist with the service work.

· You do not engage subcontractors.

· You always accompany your employees travelling daily to jobsites in towns approximately 100 kms away from your business premises. There is no overnight stays involved by you or any of your employees.

· You purchase lunch for yourself whilst working at jobsites in those towns

· You purchase lunch for your employees approximately twice a week whilst they are working at jobsites in those towns.

· The food purchased is usually takeaway from fast food outlets. The food is consumed by you and you employees on the jobsites.

· You and your employees do not eat at cafes

· The food is purchased by you on one receipt. You keep the receipt for the purchase of food.

· The amount spent on lunch per person on average is $10.00. Your employees do not reimburse you the expenses. They also do not contribute any money towards the expenses.

· You have applied for a private ruling on the question of whether the cost of lunches you purchase for yourself, and for your employees while you and your employees are working at locations outside of your business premises is deductible to you under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and the Fringe Benefits Tax implications..

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Division 38-A

Division 15

Division 69

Income Tax Assessment Act 1997

Division 8

Division 32

Fringe Benefit Tax Assessment Act 1986

Section 40

Subsection 136(1)

Reasons for decision

Under Division 11 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you are entitled to input tax credits from your creditable acquisitions. Section 11-5 explains the meaning of the term 'creditable acquisition':

What is a creditable acquisition?  

You make a creditable acquisition if:

(a)  you acquire anything solely or partly for a *creditable purpose; and

(b)  the supply of the thing to you is a *taxable supply; and

(c)  you provide, or are liable to provide, *consideration for the supply; and

(d)  you are *registered, or *required to be registered

The asterisks denote a defined term in the GST Act.

You have provided that:

· The supply of the food to you is taxable supply. GST has been included in the prepared meals that you purchase.

· You pay for the food and retain the receipts.

· You are registered for GST.

Therefore, you will be entitled to an input tax credit for the purchase of the food if the purchase is made partly or solely for a creditable acquisition.

The term 'creditable acquisition 'is defined in section 11-15:

Meaning of creditable purpose

1. You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise.

2. However, you do not acquire the thing for a creditable purpose to the extent that:

(a)  the acquisition relates to making supplies that would be *input taxed; or

(b) the acquisition is of a private or domestic nature.

Food acquired for your employees at work

You have applied for a private binding ruling on (amongst other issues) whether the expenses for food provided to your employees in jobsites away from your business premises are fringe benefits under the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986).

The private ruling No xxxx issued earlier rules that the provision of the lunches is not an exempt benefit. It is a property fringe benefit under section 40 and subsection 136(1) of the FBTAA 1986 and the expenses are deductible to you under section 8-1 of the ITAA 1997

Acquired in carrying on your enterprise

Goods and services tax ruling GSTR 2001/3 explains the entitlement to input tax credits for acquisitions and importations related to providing those benefits.

Paragraph 50 of GSTR 20013 provides that:

If you acquire or import something to provide a fringe benefit in respect of employment in your enterprise, you have acquired it in carrying your enterprise.

Paragraph 52 of GSTR 2001/3 adds:

An acquisition or importation you make to provide a fringe benefit in respect of employment in your enterprise is made in carrying on the enterprise and is not of a private or domestic nature for the purposes of section 11-15 and section 15-10. It is your purpose at the time of making the acquisition or importation that is relevant to whether the acquisition or importation is for a creditable purpose. For example, an acquisition made to provide a car for the private use of your employee is made for a creditable purpose.

Does the exceptions under Division 69 of the GST Act applies

This Division provides that some expenses that are not deductible under the Income Tax Assessment Act 1997 (ITAA 1997) do not give rise to creditable acquisitions or creditable importations (that is no entitlement to input tax credit).

The private ruling provides that the cost of lunches you purchased for your employees, while those employees are working at locations outside of your business premises is deductible to you under section 8-1 of the ITAA 1997. Your purchase of lunch for your employees is not considered to be provision of entertainment under section 32 -5 of the ITAA1997.

Therefore, Division 69 of the GST Act has no application in relation to the entitlement of input tax credits arising from your acquisition of food provided to your employees who are working away from your business premises.

Food acquired for your own use

The private ruling provides that the acquisition of food for your own use is of private and domestic nature. You are not entitled to any input tax credit as the acquisition is not a creditable purpose under paragraph 11-15(2)(a) of the GST Act and therefore it is not a creditable acquisition under section 11-5 of the GST Act.