Edited version of private advice

Authorisation Number: 1012624511613

Subject: Fringe benefits tax - Meal entertainment

Question 1

Will the payment or reimbursement of the car parking expenses incurred by a local employee at a commercial carpark located at, or in the vicinity of, the event venue be included in the calculation of the taxable value of the meal entertainment benefits provided to your employees and associates under section 37BA of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Will the payment or reimbursement of the car parking expenses incurred by an interstate employee who parks at a long stay airport carpark when attending the event be included in the calculation of the taxable value of the meal entertainment benefits provided to your employees and associates under section 37BA of the FBTAA?

Answer

Yes

Question 3

Will the cost of the food and drink provided to an interstate employee returning home on the day after the event be included in the calculation of the taxable value of the meal entertainment benefits provided to your employees and associates under section 37BA of the FBTAA?

Answer

No

Question 4

Will the cost of the travel and accommodation (including car parking expenses, food and drink) of the organisers of the event be included in the calculation of the taxable value of the meal entertainment benefits provided to your employees and associates under section 37BA of the FBTAA?

Answer

No

Question 5

Will the cost of the travel and accommodation of interstate employees who attend the event while they are in the city for work related meetings be included in the calculation of the taxable value of the meal entertainment benefits provided to your employees and associates under section 37BA of the FBTAA?

Answer

A travel or accommodation expense incurred by an interstate employee will not be included in the calculation of the taxable value of the meal entertainment benefits if the expense is incurred to enable the employee to attend the work related meetings, rather than to attend the event.

This ruling applies for the following periods:

For a number of FBT years commencing in the year ended 31 March 2013

The scheme commences on:

In the FBT year ended 31 March 2013

Relevant facts and circumstances

During the year you made an election under section 37AA of the FBTAA to apply Division 9A of the FBTAA to determine the taxable value of the meal entertainment fringe benefits.

You further elected to use the 50/50 split method contained in subdivision B of Division 9A of the FBTAA to calculate the taxable value of meal entertainment fringe benefits.

During the year you held an annual event (the event).

The event was held on a Friday evening.

The event was attended by interstate and local employees.

Each of the employees who attended were able to bring one guest.

At the event you provided the attendees with 'meal entertainment' in accordance with subsection 37AD(a) of the FBTAA.

The event was attended by employees who live and work in the city in which the event was held (local employees) and employees who live and work in an interstate city (interstate employees).

Local employees

You reimbursed the taxi fares and/or car parking expenses incurred by local employees who attended the event.

Interstate employees

You paid or reimbursed the following expenses of the interstate employees who attended the event:

• accommodation

• accommodation booking fee

• airfare and ticket booking fee

• taxi fare to and from airport

• long stay airport car parking

• meals and sustenance during travel

• food and drink after the event, but prior to travelling back to home state.

Generally an interstate employee will fly to the event city on Friday to attend the event in the evening and then fly home the next day.

However, some of the interstate employees will already be in the event city for other business reasons. For example, an employee invited to attend the event may have been required to fly to the city in which the event is held in the normal course of performing their employment duties to attend a business meeting. The employee will then attend the event before returning to their home state on the following day. Alternatively, the employee may fly to the city in which the event is being held to attend the event on a Friday and then stay in the city over the weekend and attend a business meeting on the Monday morning.

Event organisers

One or two of your employees work as organisers of the event and travel from interstate to organise and facilitate the event.

The organisers work in their home state to book the entertainment venue and arrange the banqueting, table and seating arrangements prior to the actual event.

The organisers attend the venue one or two days before the event in their role as event organisers. The organisers incur accommodation, meal and travel costs associated with this work before the evening of the event.

The organisers attend the event as facilitators and acting as master of ceremonies.

Where applicable you will pay for or reimburse the following expenses of the organisers:

• accommodation (more than one night, as organisers attend the venue one or two days prior to the event)

• accommodation booking fee

• airfare and ticket booking fee

• taxi fare to and from airport

• long stay airport car parking

• food and drink during travel

• food and drink after the event but prior to travelling back to home state.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 20

Fringe Benefits Tax Assessment Act 1986 Division 9A

Fringe Benefits Tax Assessment Act 1986 section 37AA

Fringe Benefits Tax Assessment Act 1986 section 37AC

Fringe Benefits Tax Assessment Act 1986 section 37AD

Fringe Benefits Tax Assessment Act 1986 section 37AF

Fringe Benefits Tax Assessment Act 1986 section 40

Fringe Benefits Tax Assessment Act 1986 section 58P

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Will the payment or reimbursement of the expenses be included in the calculation of the taxable value of the meal entertainment benefits under section 37BA of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

For the relevant year you made an election to use the 50/50 split method in section 37BA of the FBTAA to calculate the taxable value of the meal entertainment fringe benefits provided.

Where this election is made, section 37BA provides that the total taxable value of meal entertainment fringe benefits of the employer for the FBT year will be 50% of the expenses incurred by the employer in providing meal entertainment for the FBT year. As set out in the note to section 37BA this means the employer's aggregate fringe benefits amount will include 50% of the total expenses incurred by the employer in providing meal entertainment for the FBT year. Therefore, it can include expenditure which otherwise would not be a fringe benefit. For example, the cost of meal entertainment provided to clients and expenditure which otherwise would be an exempt benefit.

Section 37AC of the FBTAA sets out when a meal entertainment benefit has been provided:

Where at a particular time an employer (the provider) to whom this Division applies provides meal entertainment to another person (the recipient) the provision of the meal entertainment is taken to constitute a meal entertainment benefit provided by the provider to the recipient at that time.

Section 37AD of the FBTAA defines the term 'provision of meal entertainment' as follows:

A reference to the provision of meal entertainment is a reference to the provision of:

(a) entertainment by way of food or drink; or

(b) accommodation or travel in connection with, or for the purpose of facilitating, entertainment to which paragraph (a) applies; or

(c) the payment or reimbursement of expenses incurred in providing something covered by paragraph (a) or (b);

whether or not:

(d) business discussion or business transactions occur; or

(e) in connection with the working of overtime or otherwise in connection with the performance of the duties of any office or employment; or

(f) for the purposes of promotion or advertising; or

(g) at or in connection with a seminar.

In your ruling application you accepted that meal entertainment is provided at the event. The issues to be considered are as follows:

(a) Were the car parking expenses incurred by local employees in parking at a commercial carpark located at, or in the vicinity of the event, expenses incurred in providing travel in connection with, or for the purpose of facilitating meal entertainment?

(b) Were the car parking expenses incurred by interstate travelling employees attending the event in a long stay airport carpark incurred in providing travel in connection with, or for the purpose of facilitating meal entertainment?

(c) Was the food and drink provided to interstate employees returning home on the day after the event entertainment by way of food or drink?

(d) Were the travel and accommodation costs of the organisers of the event incurred in connection with, or for the purpose of facilitating meal entertainment?

(e) Were the travel and accommodation costs of interstate employees who attend the event while they are in the city for work related meetings incurred in connection with, or for the purpose of facilitating meal entertainment?

(a) Were the car parking expenses incurred by local employees in parking at a commercial carpark located at, or in the vicinity of the event, expenses incurred in providing travel in connection with, or for the purpose of facilitating meal entertainment?

ATO Interpretative Decision ATO ID 2014/15 Fringe Benefits Tax Meal Entertainment Fringe Benefit: travel - reimbursement of car parking fees (ATOID 2014/15) considers whether car parking fees are an expense incurred in providing the employee with travel for the purposes of section 37AD of the FBTAA.

ATOID 2014/15 considers the scenario where an employer provides entertainment by way of food or drink to an employee at a venue that is not the employee's place of employment. The employee drives to the venue in his car and parks in a car park adjacent to the venue. The employer reimburses the employee for his car parking fees.

ATOID 2014/15 states:

...For the purposes of section 37AD of the FBTAA the car parking fees reimbursed by the employer are an expense incurred in providing the employee with travel as the fees were incurred as part of the employee's journey.

…

The employer provided the employee with entertainment by way of food and drink. Therefore, the employee was provided with meal entertainment for the purposes of paragraphs 37AD(a).

The question arises as to whether the car parking fees reimbursed by the employer are an expense incurred in providing travel. 'Travel' is not defined in section 37AD.

Relevantly, the Macquarie Dictionary, Sixth Edition, 1 October 2013, defines 'travel' as:

1. To go from one place to another; to make a journey; to travel for pleasure

The term 'journey' is defined as:

1. A course of travel from one place to another especially by land.

The relevant journey undertaken by the employee in connection with the provision of the entertainment by way of food or drink was the journey from his home to the venue.

The car parking fees were incurred as part of the employee's journey.

Accordingly, the car parking fees reimbursed by the employer are an expense incurred in providing the employee with travel for the purposes of section 37AD.

Your employees' circumstances are analogous to the circumstances considered in ATOID 2014/15. The same reasoning can be applied to your employee's circumstances to conclude that the car parking fees you pay for or reimburse for your local employees are an expense incurred in providing your employees with travel in connection with or for the purpose of facilitating entertainment by way of food or drink.

(b) Were the car parking expenses incurred by interstate travelling employees attending the event in a long stay airport carpark incurred in providing travel in connection with, or for the purpose of facilitating meal entertainment?

ATOID 2014/15 can similarly be applied in this circumstance to conclude that the payment or reimbursement of the car parking fees will be an expense incurred in providing your employees with travel in connection with or for the purpose of facilitating entertainment by way of food or drink.

ATOID 2014/15 states:

The relevant journey undertaken by the employee in connection with the provision of the entertainment by way of food or drink was the journey from his home to the venue.

The car parking fees were incurred as part of the employee's journey.

Accordingly, the car parking fees reimbursed by the employer are an expense incurred in providing the employee with travel for the purposes of section 37AD.

In the interstate employees' circumstances the journey undertaken in connection with the provision of entertainment by way of food or drink was the journey to attend the venue. In this case, this would include the parking at the airport as this is part of the travel for the purpose of attending the event where the meal entertainment is provided.

(c) Was the food and drink provided to interstate employees returning home on the day after the event entertainment by way of food or drink?

Taxation Ruling TR 97/17 Income Tax and fringe benefits tax: entertainment by way of food or drink (TR 97/17) discusses the concept of what constitutes entertainment as it relates to the provision of food or drink for the purposes of the FBTAA and the ITAA 1997. Relevantly, TR 97/17 provides:

6. The definition of 'entertainment' contained in section 32-10 of the ITAA, and adopted by the FBTAA in the definition of 'entertainment' in subsection 136(1), does not prescribe that entertainment occurs every time food or drink is provided.

7. In order to determine when the provision of food or drink to a recipient results in the entertainment of that person, an objective analysis of all the circumstances surrounding the provision of the food or drink is required. In making this determination an employer should consider:

• why the food or drink is being provided;

• what type of food or drink is being provided;

• when that food or drink is being provided; and

• where that food or drink is being provided.

Food or drink which is determined by these criteria to constitute entertainment is taken to be 'meal entertainment'.

Where an employee is travelling in the course of performing their duties of employment, food and drink provided as sustenance will generally not be considered to be meal entertainment. TR 97/17 states:

21. Where an employee is travelling in the course of performing their employment duties, the food or drink is consumed as a result of that work-related travel. In the absence of supplementary entertainment, the food or drink is not provided by the employer in order to confer entertainment on that employee. Therefore, the meal does not have the character of entertainment.

…

70. Will an employer be liable to FBT on the reimbursement to an employee of the cost of food or drink consumed while travelling on the employer's business?

Answer

71. No. Generally, the food or drink does not amount to meal entertainment. The employer is providing the employee with food or drink while undertaking work-related travel. As a result, the food or drink does not have the character of entertainment. However, this is not the case where there was entertainment (e.g., a floor show) provided with the meal. The cost of the food or drink would have been 'otherwise deductible' to the employee under section 8-1 of the ITAA. Therefore, the taxable value of the expense payment fringe benefit is reduced to nil.

TR 97/17 also provides the following relevant example:

Example 13.4

117. An employer pays for an employee and spouse to attend an international accounting conference which is being held in another State capital city.

…

118. The question to be asked is whether the meals amount to meal entertainment. Because the employee is travelling in the course of his employment to attend the seminar, meals such as breakfast, lunch and dinner are not, generally, regarded as meal entertainment and, because of the 'otherwise deductible' rule, do not give rise to an FBT liability.

119. Food or drink provided at the gala dinner dance constitutes meal entertainment. This is because entertainment is provided with the meals.

…

Similarly to the example provided by TR 97/17, your employees travel interstate to attend the event. Although, the food and drink provided at the event constitutes the provision of entertainment, the examples from TR 97/17 referred to above indicate this fact by itself does not cause other meals provided during the interstate trip to constitute the provision of entertainment. Rather, it is necessary to separately consider each of the meals.

In applying the four tests provided in paragraph 23 of TR 97/17 to the food provided on the way home:

• the food and drink is provided for sustenance;

• the food and drink consumed while travelling home on the day after the event is a morning tea or light meal;

• the food and drink is provided while the employee is travelling;

• the food or drink is not provided at the employee's place of employment.

Although the provision of food and drink at a location that is not the employee's usual place of employment is more likely to have the character of entertainment, this condition by itself does not provide a basis for not applying the general rule set out in paragraph 21 of TR 97/17. Therefore, the cost of the meals provided on the following day to the interstate employees will not constitute the provision of meal entertainment.

Rather, the meals will be either expense payment benefits according to section 20 of the FBTAA where you reimburse your employees, or property benefits according to section 40 of the FBTAA where you provide the food or drink to the employees.

In your application, you suggested the food and drink will be an exempt benefit under section 58P on the basis that the value of the food or drink is less than $300 and is provided on an infrequent and irregular basis. In relation to this suggestion, we note that these are only two of the factors that need to be considered when determining whether a benefit is an exempt benefit under section 58P.

Section 58P states:

58P Exempt benefits - minor benefits

(1) Where:

(a) a benefit (in this section called a minor benefit) is provided in, or in respect of, a year of tax (in this section called the current year of tax) in respect of the employment of an employee of an employer;

...

(e) the notional taxable value of the minor benefit in relation to the current year of tax is less than $300; and

(f) having regard to:

(i) the infrequency and irregularity with which associated benefits, being benefits that are identical or similar to:

(A) the minor benefit; or

(B) benefits provided in connection with the provision of the minor benefit;

have been or can reasonably be expected to be provided;

(ii) the amount that is, or might reasonably be expected to be, the sum of the notional taxable values of the minor benefit and any associated benefits, being benefits that are identical or similar to the minor benefit, in relation to the current year of tax or any other year of tax;

(iii) the amount that is, or might reasonably be expected to be, the sum of the notional taxable values of any other associated benefits in relation to the current year of tax or any other year of tax;

(iv) the practical difficulty for the employer in determining the notional taxable values in relation to the current year of tax:

(A) if the minor benefit is not a car benefit - the minor benefit; and

(B) if there are any associated benefits that are not car benefits - those associated benefits; and

(v) the circumstances surrounding the provision of the minor benefit and any associated benefits including, but without limiting the generality of the foregoing:

(A) whether the benefit concerned was provided to assist the employee to deal with an unexpected event; and

(B) whether the benefit concerned was provided otherwise than wholly or principally by way of a reward for services rendered, or to be rendered, by the employee;

it would be concluded that it would be unreasonable to treat the minor benefit as a fringe benefit in relation to the employer in relation to the current year of tax;

the minor benefit is an exempt benefit in relation to the current year of tax.

A number of these conditions require a consideration of the associated benefits. Subsection 58P (2) of the ITAA sets out what is considered to be an associated benefit of a minor benefit for the purposes of considering the criteria above.

Subsection 58P(2) states:

For the purposes of this section, a benefit is an associated benefit in relation to a minor benefit if, and only if:

(a) any of the following subparagraphs applies:

(i) the benefit is identical or similar to the minor benefit;

(ii) the benefit is provided in connection with the provision of the minor benefit;

(iii) the benefit is identical or similar to a benefit provided in connection with the provision of the minor benefit;

(b) the benefit and the minor benefit both relate to the same employment of a particular employee; and

(c) the benefit is not an exempt benefit by virtue of a provision of this Act other than this section.

In applying this definition, each of the other benefits that are provided in connection with the travel will be an associated benefit. For example, the flights, accommodation, parking, and the food and drink at the event will be associated benefits. When these benefits are taken into account, the food and drink provided on the following day is unlikely to be an exempt minor benefit under section 58P.

In your application you also referred to the definition of work-related travel in subsection 136(1) in the context of discussing the application of the otherwise deductible rule. It should be noted that 'work-related travel' is a specific term used to determine whether the private use of a motor vehicle will be an exempt benefit under either subsection 8(2) or 47(6) of the FBTAA.

Rather than considering the definition of work related travel, the more relevant question to be considered is whether the employee would have been entitled to claim an income tax deduction for the cost of the food or drink if you had not reimbursed or paid for the cost of the food or drink?

Guidance for considering this question is provided in ATO Interpretative Decision ATO ID 2002/807 Income Tax Deductions: meal expenses whilst on overnight business travel (ATO ID 2002/807) which states:

Generally, meal expenses are not allowable as a deduction under section 8-1 of the ITAA on the basis there isn't a sufficient connection between the expenditure and the income earning activities of a taxpayer. However, there is, no general proposition that meal expenses can never be deductible: FC of T v. Cooper 91 ATC 4396; (1991) ATR 1616, Roads and Traffic Authority of NSW v FC of T 93 ATC 4508; (1993) 26 ATR 76, Re Carlaw and FC of T 95 ATC 2166; (1995) 31 ATR 1190, AAT decision in Case 9/96 96 ATC 186.

The deductibility of expenditure on meals will depend on the essential character of the expenditure on the basis of the facts of each case. In this case, the relevant expenses are considered to be incurred in carrying on the business as the business requires overnight travel. The meal expenses are not considered to be private in nature.

As a result, the taxpayer's meal expenses incurred while travelling overnight in the course of the taxpayer's business, are deductible under section 8-1 of the ITAA 1997, provided the relevant substantiation provisions of the ITAA 1997 are satisfied.

Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits (MT 2030) further clarifies:

36. When an employee is travelling on business on behalf of an employer, expenses of travel are incidental to the proper carrying out of the employment function and do not have the character of being private or domestic expenses. As it was stated in Case No. B 84, 2 TBRD 390, "…where the employment actually involves the duty of travelling and therefore staying away from home, the extra expenses of living at hotels, etc., together with costs of conveyance, etc., are deductible as, to that extent, they cease to be of a private or domestic nature."

(d) Were the travel and accommodation costs of the organisers of the event incurred in connection with, or for the purpose of facilitating meal entertainment?

One or two of your employees work as organisers of the event and travel from interstate to organise and facilitate the event.

The organisers work in their home state to book the entertainment venue and arrange the banqueting, table and seating arrangements prior to the actual event.

The organisers attend the venue one or two days before the event in their role as event organisers. The organisers incur accommodation, meal and travel costs associated with this work before the evening of the event.

Guidance for considering whether the travel and accommodation costs of the event organisers will be considered to be meal entertainment was provided in the ATO response to agenda item 7 of the meeting of the FBT subcommittee of the National taxation Liaison Group held on 19 May 2005. In discussing the treatment of food and drink provided by a sporting body to employees required to attend an event to host sponsors of the club or members of the public/supporters who have paid to attend a function/event and be entertained the ATO response said in part:

In essence, the CPA Australia submission contends that firstly, in the circumstances outlined, that the employee's attendance is required/mandatory and is part of the employee's duties of employment. Secondly, that a 'player' is providing entertainment at a particular function and therefore is not being entertained and thirdly that attendance at interstate functions does not have the character of entertainment.

Given the above referred to extracts from TR 97/17 the first proposition put forward cannot be accepted. The views of the Tax Office and the clear policy intent of the relevant legislation covering 'entertainment' is that a requirement to attend a lunch, function and so on, as part of employment duties, whether or not business discussions occur, will not be detrimental to a finding that in fact 'entertainment' has been provided.

The Tax Office noted Case Y11, 91 ATC 184, as being on point (notwithstanding the fact that the case considered section 51AE which was repealed, as the current relevant provisions in Division 32 of the ITAA contain the same broad policy intent).

That case concerned a senior officer of the Australian defence force who was engaged to negotiate at high levels in the USA over substantial contracts. The expenditure that was in question in the case was incurred on a range of lunches, cocktail parties, dinners and other forms of social contact which were directly relevant to the taxpayer's negotiating duties and the discharge of the protocols of his exacting office. The applicant's argument was that he was a serving military officer and that he was required to carry out those duties. The Senior Member affirmed the decision under review, the applicant was not entitled to deduct the expenditure incurred and noted that 'whatever policy compromises are involved in a blunt and essentially arbitrary solution to the problem of taxation of entertainment fringe benefits, the objectives of the provision are clear'.

In relation to the second contention, that a 'player' is in fact the entertainment at a particular function and is not therefore being entertained, the Tax Office acknowledged that in applying the tests in TR 97/17, it could be correct to say that entertainment has not been provided to that player (as an employee). The player may appear as the draw-card and is not attending the function to be entertained.

In respect of the third contention, that attendance at interstate functions does not have the character of entertainment, this would require all the facts of a particular circumstance to be considered.

Further guidance is provided in the minutes of the FBT National Taxation Liaison Group meeting held on 23 March 1995. Agenda item 11 states:

The TIA asked whether FBT applied in relation to entertainment in situations where a "tour leader" accompanies a group of employees of another employer who are partaking of the trip as part of an award system.

The ATO was of the opinion that the tour leader was clearly undertaking work responsibilities and that there would not be any entertainment fringe benefit.

In applying this guidance, it is accepted that if the organisers are organising and facilitating the event their situation will be similar to that of the tour leader. That is, where the employee is undertaking work responsibilities that involve the provision of entertainment to others, the travel and accommodation that they receive will not constitute the provision of entertainment. In such a situation, the cost of the travel and accommodation will not be included in the calculation of the taxable value of your meal entertainment fringe benefits.

(e) Were the travel and accommodation costs of interstate employees who attend the event while they are in the city for work related meetings incurred in connection with, or for the purpose of facilitating meal entertainment?

Some employees who are required to attend the event are also required to travel for work and will arrange work travel to occur prior to, or following the event.

As discussed above, section 37AD states that the provision of meal entertainment includes:

(a) entertainment by way of food or drink; or

(b) accommodation or travel in connection with, or for the purpose of facilitating, entertainment to which paragraph (a) applies; or

(c) the payment or reimbursement of expenses incurred in providing something covered by paragraph (a) or (b);

…

In discussing this definition in relation to an employee who travels interstate solely to attend the event it was concluded:

• the cost of the flights will be included in the calculation of the taxable value of the meal entertainment fringe benefits on the basis of being travel in connection with or for the purpose of facilitating meal entertainment;

• the cost of taxi fares will be included in the calculation of the taxable value of the meal entertainment fringe benefits on the basis of being travel in connection with or for the purpose of facilitating meal entertainment;

• the reimbursement of the long stay airport parking will be included in the calculation of the taxable value of the meal entertainment fringe benefits on the basis of being travel in connection with or for the purpose of facilitating meal entertainment; and

• the cost of the accommodation will be included in the calculation of the taxable value of the meal entertainment fringe benefits on the basis of being accommodation in connection with or for the purpose of facilitating meal entertainment.

However, the meals provided to employees prior to travelling home the next day will not be meal entertainment as it does not involve the provision of entertainment.

In considering whether these conclusions will change if the employee is in the interstate city for other business purposes, it is relevant to refer to the guidelines provided by Taxation Ruling TR 98/9 Income tax: deductibility of self-education incurred by an employee or a person in business (TR 98/9) in relation to expenses that serve dual purposes. Paragraphs 64 to 70 of TR 98/9 state:

64. If the purpose of a study tour or attendance at a work-related conference or seminar is the gaining or producing of income, the existence of an incidental private purpose does not affect the characterisation of the related expenses as wholly incurred in gaining assessable income.

65. Both Ronpibon Tin NL (78 CLR at 59; 8 ATD at 437) and Fletcher & Ors (173 CLR at 16; 91 ATC at 4957; 22 ATR at 621) recognise there are at least two kinds of expenditure that require apportionment under section 8-1. The first is expenditure in respect of a matter where distinct and severable parts are devoted to gaining income and other parts are devoted to some other end. If a study tour or work-related conference or seminar was mainly devoted to a private purpose, such as having a holiday, and the gaining or producing of income was merely incidental to the private purpose, only those expenses directly attributable to the income-earning purpose would be allowable.

66. The second kind of apportionable expenditure is a single outlay that serves both an income-earning purpose and some other purpose indifferently. While the High Court recognised that there can be no precise arithmetical division in such cases, it said there must be some fair and reasonable division on the facts of each case. For example, if a study tour or work-related conference or seminar is undertaken equally for income-earning purposes and private purposes, it would be appropriate to apportion the expenses equally between the purposes.

67. Example: Glenn, a qualified architect, attends an eight-day work-related conference in Hawaii on trends in modern architecture. One day of the conference involves a sight-seeing tour of the island and a game of golf is held on the final afternoon of the conference. As the main purpose of attending the conference is the gaining or producing of income, the total cost of the conference (air fares, accommodation and meals) is allowable.

68. The existence of private pursuits, such as the island tour and the game of golf, is purely incidental to the main purpose and does not affect the characterisation of the conference expenses as wholly incurred in gaining assessable income.

69. Example: Jenny, a doctor, was holidaying in Cairns when she became aware of a work-related seminar on the current treatment of cancer patients. The cost of the half-day seminar was $200. Jenny is able to claim a deduction for the cost of the seminar because it is directly attributable to an income-earning purpose. However, no part of her air fare to Cairns or her holiday accommodation is an allowable deduction.

70. Example: Francesco, a paediatrician, has 2 equal purposes when he decides to attend a five-day international conference on paediatrics in Singapore to be followed by a seven-day holiday in Thailand. The conference package is $2,500 ($1,000 return air fare, $500 for the cost of the conference and $1,000 for accommodation and meals at the conference venue). Francesco paid another $2,000 for accommodation, meals and car hire for the 7 day holiday in Thailand. Francesco is allowed a deduction of $1,500 for the conference cost and the accommodation and meals expenses at the conference. Only half of the return air fare ($500) is allowed as the expense was incurred for two equal purposes, one income-earning and the other private. The other expenditure of $2,000 relating to the holiday in Thailand is private in nature and not allowable as a deduction.

In applying these guidelines to the relevant expenses, it is necessary to consider the purpose of the expenditure. That is, can the expense be said to be incurred to enable the employee to attend the business meeting, or was it incurred to enable the employee to attend the event?

For example, if the employee was required to fly to an interstate city on Monday to attend meetings in the interstate city from Monday to Friday the accommodation provided on Monday to Thursday nights would not be included in the calculation of the taxable value of the meal entertainment as it would not be considered to be provided in connection with, or for the purpose of facilitating meal entertainment. However, if the employee stayed an extra night solely for the purpose of attending the event, the accommodation provided on Friday night would be considered to be provided in connection with meal entertainment.

Similarly, the flights to the interstate city will not be considered to be travel provided in connection with, or for the purpose of facilitating meal entertainment where the attendance at the event is incidental to the attendance at the business meetings. However, if the attendance at the event is more than incidental to the business meeting, the flights will in part be provided in connection with meal entertainment. In such a situation, part of the cost of the flights will be included in the calculation of the taxable value of the meal entertainment fringe benefits.

Where the employee drives to the airport and parks the car in long stay parking prior to flying to the interstate city to undertake work duties at a different location to the venue at which the event is held, the cost of the car parking will not be included in the calculation of the taxable value of the meal entertainment as the car parking fees are not incurred in the course of the journey which facilitates the provision of the meal entertainment. That is, the parking is part of the journey to the interstate work location, rather than the journey to the event.

The treatment of the food and drink provided to the employee will depend upon the circumstances in which it is provided. Generally, unless entertainment is provided with the food and the drink (for example, at the event) the cost of the food and drink will not be included in the calculation of the taxable value of the meal entertainment as food and drink provided to an employee travelling for work generally does not constitute the provision of entertainment.