Edited version of private advice

Authorisation Number: 1052299925481

Date of advice: 22 October 2024

Ruling

Subject: FBT - employer does not hold physical business premises

Question 1

Do restaurants and cafés constitute 'business premises' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) in circumstances where the employer does not hold physical business premises?

Answer

No.

Question 2

In respect of the light meals provided at a café or restaurant provided during day-time staff meetings, where no alcohol is provided:

a)    Has the employer provided its employees with an expense payment benefit under section 20 of the FBTAA, or a property benefit under section 40 of the FBTAA?

b)    Do the light meals provided meet the definition of a 'meal entertainment benefit' under section 37AC of the FBTAA?

c)    Does an exemption from fringe benefits tax (FBT) apply under the FBTAA?

Answer

a)    The employer has provided its employees with a property benefit under section 40 of the FBTAA.

b)    Yes

c)    No

Question 3

In respect of the meals and drinks (including alcohol) provided at their night-time staff meetings:

a)    Has the employer provided its employees with an expense payment benefit under section 20 of the FBTAA, or a property benefit under section 40 of the FBTAA?

b)    Do the meals and drinks (including alcohol) provided meet the definition of a 'meal entertainment benefit' under section 37AC of the FBTAA?

c)    Does an exemption from FBT apply under the FBTAA?

Answer

a)    The employer has provided its employees with a property benefit under section 40 of the FBTAA.

b)    Yes

c)    No

Question 4

In respect of the meals and drinks (including alcohol) provided at the annual Christmas party held at a café or restaurant:

a)    Has the employer provided its employees with an expense payment benefit under section 20 of the FBTAA, or a property benefit under section 40 of the FBTAA?

b)    Do the meals and drinks (including alcohol) provided meet the definition of a 'meal entertainment benefit' under section 37AC of the FBTAA?

c)    Does an exemption from FBT apply under the FBTAA?

Answer

a)    The employer has provided its employees with a property benefit under section 40 of the FBTAA.

b)    Yes

c)    No

This ruling applies for the following periods:

FBT year ending 31 March 2024

FBT year ending 31 March 2025

FBT year ending 31 March 2026

The scheme commenced on:

1 May 2023

Relevant facts and circumstances

XXXX Pty Ltd

XXXX Pty Ltd ('the employer') is an Australian private company. It has operated as a hybrid/remote company since May 20XX.

The business operates within regular business hours, being 8:00am through to 5:00pm.

Business premises

The employer originally maintained a physical office by holding a commercial lease agreement but this has since been exited.

Currently, the employer does not maintain a physical place of business.

Alternatively, the company has a subscription to a co-working office space which approximately XX% of the employees make use of throughout a given month.

Of the XX%, the average attendance is X days per week.

In their current circumstances, all staff members operate remotely via the internet and 99% of their client meetings are online.

Meetings and meals

The employer holds team meetings, no more than monthly and all employees are invited.

The purpose of these meetings is to foster a sense of team for the employees and to discuss operational matters, such as specific clients and business strategy.

These meetings are held at different times of the day and are at a public location (i.e. cafés or restaurants).

It is not possible to host these meetings at any business premises, as the employer does not have a physical location.

At these meetings, meals are provided.

Examples of team meetings are:

(i)    Employee milestone lunches - directors of the company take employees out for lunch (provided they live locally) for their work anniversary each year and for key milestones like promotions.

(ii)   Team lunches - the employer provides a small budget each month for the small teams within the company to get together in a social setting to have a coffee / lunch together. It is not mandatory for the employees to attend.

Most meetings are held around breakfast time and if the meal is during the day, then no alcohol is served.

However, if the meeting is held over dinner, then alcohol is available.

In addition, the employer holds an annual Christmas party which involves a team building activity, bar tab and formal sit-down meal during lunch or dinner.

None of the above-mentioned expenditure exceeds $300 per employee, per occasion.

None of these are provided under a salary packaging arrangement and are charged to the company credit card.

In addition, the employer will have meetings with existing and potential clients. The directors of the company meet with key clients and potential new clients for coffee, lunches and dinner.

The purpose of these lunches is business development / relationship building.

These expenses are also charged to the company's credit card.

Employee contracts

The employees' contracts currently do not include any provisions about the employees' requirement to work remotely.

The employer does not have any location requirement for employees, to reside or be available within the locality of the company's base.

When required the employer will make arrangements to fly employees up to XXXX for their training and key company/culture building events throughout the year.

Any expenses relating to these arrangements are incurred by the employer.

Relevant legislative provisions

Division 32 of the Income Tax Assessment Act 1997

Section 32-5 of the Income Tax Assessment Act 1997

Section 32-10 of the Income Tax Assessment Act 1997

Division 9 of the Fringe Benefits Tax Assessment Act 1986

Section 20 of the Fringe Benefits Tax Assessment Act 1986

Section 37AA of the Fringe Benefits Tax Assessment Act 1986

Section 37AD of the Fringe Benefits Tax Assessment Act 1986

Section 40 of the Fringe Benefits Tax Assessment Act 1986

Section 41 of the Fringe Benefits Tax Assessment Act 1986

Section 58P of the Fringe Benefits Tax Assessment Act 1986

Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986

Reasons for decision

Question 1

Do restaurants and cafés constitute 'business premises' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) in circumstances where the employer does not hold physical business premises?

Summary

No, restaurants and cafés do not constitute the employer's 'business premises' as per the definition of that term in subsection 136(1) of the FBTAA.

Detailed reasoning

'Entertainment' is defined in subsection 32-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as being entertainment by way of food or drink or recreation, or accommodation or travel to do with providing that entertainment. Subsection 32-10(2) of the ITAA 1997 provides that if business discussions or transactions occur during entertainment events, the events are still considered to be entertainment.

As provided in paragraph 6 of Taxation Ruling TR 97/17 Income tax and fringe benefits tax: entertainment by way of food or drink (TR 97/17), the definition of 'entertainment' in section 32-10 of the ITAA 1997 (and as adopted in the meaning of that term in subsection 136(1) of the FBTAA) does not prescribe that entertainment occurs every time food or drink is provided.

Some examples of entertainment are provided in section 32-10 of the ITAA 1997, such as business lunches and staff social functions. In these examples, the provision of food or drink confers entertainment on the recipient.

TR 97/17 provides guidance on the concept of what is 'entertainment' as it relates to the provision of food or drink for the purposes of applying the relevant provisions of the FBTAA and the ITAA 1997. Paragraph 7 of TR 97/17 states the following:

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 the food or drink is being provided.

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

Paragraph 23 of TR 97/17 provides further details on the above four factors that should be considered when undertaking an objective analysis of the criteria.

Paragraph 24 of TR 97/17 indicates that no one factor in paragraph 23 will be determinative by itself. However, paragraphs (a) and (b) are considered more significant ('why' and 'what'). The application of the above factors results in a determination of whether the food or drink constitutes meal entertainment.

Paragraph 18 of TR 97/17 takes the view that the mere provision of food or drink in any circumstance does not necessarily constitute 'entertainment'. An element of entertainment is required before the provision of food or drink becomes meal entertainment. However, it was noted that, in most cases, the mere provision of food or drink will satisfy the 'entertainment' test. It is only in a narrow category of cases where the mere provision of food or drink does not amount to 'entertainment' for the purposes of Division 32 of the ITAA 1997.

Paragraphs 19 and 20 of TR 97/17 contrasts the consideration of providing light meals with non-deductible entertainment expenses as follows:

19. We have expressed this view previously, for example, in Taxation Ruling IT 2675. That Ruling considers that the provision of morning and afternoon tea to employees (and associates of employees) on a working day, either on the employer's premises or at a worksite of the employer, is not entertainment. The provision of light meals (finger food, etc.), for example in the context of providing a working lunch, is not considered to be entertainment. The provision of food or drink in these circumstances does not confer entertainment on the recipient.

20. The provision of light meals can be contrasted with the examples of non-deductible entertainment given in the explanatory memorandum to Taxation Laws Amendment Bill (No 4) 1985, i.e., business lunches and drinks, dinners, cocktail parties and staff social functions. In these examples the provision of the food or drink confers entertainment on the recipient. The wording of section 32-10 of the ITAA shows a clear intention to treat food or drink consumed in these situations as entertainment, whether or not business discussions or business transactions occur at the same time.

In considering whether the employer's provision of food and drink constitutes entertainment, it is necessary for an objective analysis of all the circumstances against the factors provided in paragraphs 7 and 23 of TR 97/17.

a) Why is the food and drink being provided?

TR 97/17 describes this test as 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.

In the current circumstances, the employer contends that the light meals are for refreshment and nourishment to foster a sense of team and to discuss business discussions for employees that choose to attend.

However, the Commissioner does consider the purpose of providing the light meals to have the character of entertainment as the food and drink is provided in a social situation for the employees to enjoy themselves. This is because of the element of fostering a sense of team, building culture and discussing business.

b) What type of food and drink is provided?

Morning and afternoon teas and light meals are generally not considered to constitute 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 greater the likelihood that entertainment arises from the consumption of the meal. Therefore, the meals take on more of the characteristics of entertainment.

Similarly, paragraph 16 of Taxation Ruling IT 2675: Income tax and fringe benefits tax: entertainment - morning and afternoon teas; light meals; and in-house dining facilities (IT 2675) provides the following:

16. The provision of biscuits and drinks such as tea, coffee, soft drinks and fruit juices to employees or their associates on a working day for morning or afternoon tea cannot be said to provide amusement or even to be an agreeable occupation. It is merely the provision of refreshments to enable the employees or associates to complete the working day in comfort. The same may be said of light meals provided by a taxpayer to employees or their associates on a working day.

However, there is no definite guideline as to when a light meal becomes more elaborate as expressed in paragraph 7 of IT 2675:

7. Light meals are treated in the same way as morning and afternoon tea. It is not the provision of entertainment to provide sandwiches and other 'hand food', salads, orange juice, etc...that are intended to, and can, be consumed on the taxpayer's premises or worksite. As 'light' meals become more elaborate, they take on more of the characteristics of entertainment. There is no particular point at which this will become obvious. Normal business practice will be the yardstick.

In the current circumstances, the food and drink that is provided to employees at staff meeting consists of items chosen by an employee from the café's/restaurant's menu, which can range from coffee to a small meal.

The Commissioner considers that the above food and drink that is generally provided at the staff meetings do not constitute 'light meals' and thus do take on the characteristics of entertainment.

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 have the character of 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 upon whether the entertainment of the recipient is the expected outcome of the provision of the food or drink.

In the current circumstances, the employer advises that the employees attend the meetings/lunches during their working day, however there is no mandatory attendance for the employees to attend.

The Commissioner does consider in this instance that entertainment is the expected outcome of the provision of the food and drink to the employees who attend the meetings/lunches as providing light meals and drinks is a mechanism to attract and have employees attend. The provision of the food and drink can be said to entice the attendance of the employees.

d) Where is the food or drink provided?

Food or drink provided on an 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, café, coffee shop is more likely to have the character of entertainment.

The light meals are provided to employees at a café or restaurant. The employer contends that each outlet serves as a temporary workspace where fostering a sense of team and operational and client discussions are conducted.

This is given that the employer does not have physical business premises and operates remotely.

It is therefore necessary to consider if each outlet would constitute 'business premises' of the employer.

Business Premises

'Business premises' is defined in subsection 136(1) of the FBTAA as follows.

Business premises, in relation to a person means premises, or a part of premises, of the person used, in whole or in part, for the purposes of business operations of the person, but does not include:

(a)  premises, or a part of premises, used as a place of residence of an employee of the person or an employee of an associate of the person;

(b)  a corporate box; or

(c)   boats or planes used primarily for the purpose of providing entertainment unless the boat or plane is used in the person's business of providing entertainment; or

(d)  other premises used primarily for the purpose of providing entertainment unless the premises are used in the person's business of providing entertainment.

Taxation Ruling TR 2000/4 Fringe benefits tax: meaning of 'business premises' further explains what is meant by business premises for the purposes of the FBTAA. The Ruling states the following:

5. It is a question of fact and degree as to whether particular premises are 'business premises' of a person. This can only be resolved by making a common sense judgment about the facts of each case and not by adopting any absolute rule.

7. If a person has ownership of premises, or has exclusive occupancy rights as lessee of premises, the premises would ordinarily be described as premises of the person.

8. In other circumstances, for example, where a person has non-exclusive possession of premises, the person satisfies this requirement if they have a right to possession of the premises, at least to the extent necessary to enable the conduct thereon of their business operations.

11. Given that each case turns on its own facts, there is no absolute or conclusive test of whether particular premises are 'business premises' of a person. However, in order to determine whether premises are 'business premises', i.e., they satisfy the respective requirements of 'premises of the person (the employer)' and 'used... for the purposes of business operations of the person (the employer)', an objective analysis of all the circumstances is necessary.

12. In making this analysis, an employer should carefully weigh all relevant matters, including the following factors that are especially relevant to determining whether each of the two requirements has been met:

(a) the control the employer has over the premises; and

(b) the consistency of an employer's actions and activities on the premises with those of normal business practices.

Importantly, each factor should be considered in relation to each of the two requirements. Further, the factors must be considered in combination and as a whole, together with all relevant matters.

13. Having regard to the above, where a person is carrying on 'business operations' on premises, the premises are their 'business premises' where in form and substance the person bears the rights and risks of possession of the premises associated with the conduct of the 'business operations.

The Ruling further explains what is meant by 'control over the premises' as follows.

48. The employer must have a right of possession and control over the use of the premises during the course of its business operations. The absence of a right of possession and control may indicate the premises are not 'of the person', or the activities being carried out on the premises are not truly 'business operations' of the person.

49. In most situations where premises are owned or held under a normal commercial lease, both possession and control exist. Conversely, for example, the ad hoc hire of squash courts by an employer does not make the squash courts 'business premises' of the employer. This is because any rights the employer has are subject to the overriding control of the operator. In a practical sense, the premises are not those of the employer.

In this case, the various cafés and restaurants where the meals are provided are not considered to be 'business premises' as the employer does not bear the rights and risks of possession of the premises associated with the conduct of business operations.

Note - The exception that other premises will be business premises such that food and drink provided to employees on these premises will be exempt benefits does not apply in the circumstances of the employer.

Paragraph 1.44 of the Explanatory Memorandum to the Taxation Laws Amendment (FBT Cost of Compliance) Act 1995 provides these other premises must be either:

•         used by employers who carry on the business of providing entertainment, e.g., a restaurant owner might hold a staff party in the restaurant, or

•         not used primarily for entertainment purposes, e.g., an airline's plane on which meals were served to employees.

The employer does not carry on a business of providing entertainment and the café/restaurant locations are used primarily for entertainment purposes by the operators of the establishments.

Conclusion

The Commissioner considers that, where the employer does not hold physical business premises, restaurants and cafés do not constitute the employer's 'business premises' as per the definition of that term in subsection 136(1) of the FBTAA.

Question 2

In respect of the light meals provided at a café or restaurant provided during day-time staff meetings, where no alcohol is provided:

a)    Has the employer provided its employees with an expense payment benefit under section 20 of the FBTAA, or a property benefit under section 40 of the FBTAA?

b)    Do the light meals provided meet the definition of a 'meal entertainment benefit' under section 37AC of the FBTAA?

c)     Does an exemption from FBT apply under the FBTAA?

Summary

a)    Yes, the employer has provided its employees with a property benefit under section 40 of the FBTAA.

b)    Yes, light meals provided during staff lunch meetings meet the definition of a 'meal entertainment benefit' under section 37AC of the FBTAA.

c)     No, the benefits provided would not be considered exempt benefits under section 58P of the FBTAA.

Detailed reasoning

Part a)

The definition of a 'fringe benefit' within subsection 136(1) of the FBTAA, is as follows:

fringe benefit, in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit:

(a) provided at any time during the year of tax; or

(b) provided in respect of the year of tax;

being a benefit provided to the employee or to an associate of the employee by:

(c ) the employer; or

(d) an associate of the employer; or

(e) a person (in this paragraph referred to as the arranger) other than the employer or an associate of the employer under an arrangement covered by paragraph (a) of the definition of arrangement between:

(i) the employer or an associate of the employer; and

(ii) the arranger or another person; or

(ea) a person other than the employer or an associate of the employer, if the employer or an associate of the employer:

(i) participates in or facilitates the provision or receipt of the benefit; or

(ii) participates in, facilitates, or promotes a scheme or plan involving the provision of the benefit;

and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so;

in respect of the employment of the employee, but does not include:

...

(g) a benefit that is an exempt benefit in relation to the year of tax;

XXXX is the employer of their employees, and they are providing a benefit to its employees, being the food and drink and/or entertainment provided during staff meetings held at a café or restaurant. They are receiving the benefit because they are employees. Therefore, the benefits are provided in respect of the employees' employment.

Consequently, the provision of food and drink to the employer employees will be fringe benefits as defined in subsection 136(1) of the FBTAA.

Expense payment benefits

An expense payment fringe benefit may arise in either of two ways:

•         you (the employer) reimburse an employee for expenses they incur.

•         you pay a third party in satisfaction of expenses incurred by an employee.

In either case, the expenses may be business expenses or private expenses, or a combination of the two.

Section 20 of the FBTAA states:

Where a person (in this section referred to as the "provider"):

(a)       makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the "recipient") to pay an amount to a third person in respect of expenditure incurred by the recipient; or

(b)       reimburses another person (in this section also referred to as the "recipient"), in whole or in part, in respect of an amount of expenditure incurred by the recipient

the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit to the recipient.

It is important to note that these rules apply to expenses incurred by an employee that are reimbursed or paid by the employer. They do not apply to goods or services that employers purchase directly and provide to the employee, nor do they apply to goods or services purchased using the company credit card.

In this situation, it is not compulsory for the employees to attend meetings that are held in cafes/restaurants (as the employer claims that 99% of their meetings are held online). While the meeting is in progress, the employees partake in light meals and non-alcoholic drinks to which the employer pays for with the company credit card. Therefore, an expense payment benefit has not occurred.

Property fringe benefit

The term 'property fringe benefit' is defined in subsection 136(1) of the FBTAA to mean 'a fringe benefit that is a property benefit' and a 'property benefit' is defined in that subsection to mean:

a benefit referred to in section 40 but does not include a benefit that is a benefit by virtue of a provision of Subdivision A of Divisions 2 to 10 (inclusive) of Part III.

Section 40 of the FBTAA states:

Where, at a particular time, a person (in this section referred to as the provider) provides property to another person (in this section referred to as the recipient), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time.

'Property' is defined in subsection 136(1) of the FBTAA to include tangible property.

Where employees use a corporate credit card to purchase the food and drink at the restaurants or cafés it is the employer as the employer that is liable for any expenses incurred on the credit card. Therefore, whether the employees are provided with the food and drink for free or use the corporate credit card, the benefit they are receiving is the provision of food and drink which is tangible property and constitutes a property fringe benefit.

In this situation, as the employer has claimed that the purchase of all light meals and drinks are purchased at the cafés or restaurants by using the business credit card, these purchases and benefits provided to the employees constitutes a property fringe benefit.

Conclusion

Food and drink purchased for employees at a restaurant or café and paid for with the employer corporate credit card will constitute a property benefit under section 40 of the FBTAA.

Part b)

Subsection 136(1) of the FBTAA provides the following definitions:

Meal entertainment fringe benefit means a fringe benefit that is a meal entertainment benefit.

Meal entertainment benefitmeans a benefit that is a meal entertainment benefit because of section 37AC.

Subsection 32-10(2) of the ITAA 1997 states that entertainment is provided even if business discussions occur. In the note to section 32-10 of the ITAA 1997, business lunches and social functions are given as examples of entertainment.

Section 37AC of the FBTAA 1986 states:

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 37AC falls under Division 9A of the FBTAA. An employer may elect that this Division will apply to the employer for an FBT year under section 37AA of the FBTAA.

The 'provision of meal entertainment' is defined in section 37AD of the FBTAA as:

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 decisions 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.

'Entertainment by way of food or drink' is not further defined in the legislation. Therefore, they have their ordinary meaning taken in the context that they appear in Division 32 of the ITAA 1997.

In this situation, as the employer has provided entertainment by way of food and/or drink, even though business discussions occur, section 37AC of the FBTAA applies in that the provision of meal entertainment has been provided to the recipient (the employee).

All four factors in paragraph 7 of TR 97/17 have been considered in determining whether the food and drink provided is entertainment. It is considered, on balance, that the provision of food and drink to employees at the café or restaurant during a meeting that holds business discussions, and where the purpose is to foster a sense of team, does not fall within the narrow category of cases where the mere provision of food or drink does not amount to entertainment.

The employer purchases all meals and drinks for their employees from the cafés or restaurants by using the business credit card. These purchases and benefits provided to the employees constitutes a property fringe benefit as defined in subsection 136(1) of the FBTAA.

Conclusion

The expenses incurred by the employer, being food and drink purchased from cafés and restaurants during team meetings, will constitute the provision of meal entertainment within the meaning of section 37AD of the FBTAA.

Part c)

If the employer chooses to make an election under Division 9A of the FBTAA to value the benefits provided to employees as a 'meal entertainment benefit', then the 'property benefit exemption' under section 41 of the FBTAA does not apply as a property benefit is no longer being provided. If the employer does not choose to make such an election under Division 9A of the FBTAA, such that the benefits provided still constitute a property fringe benefit, the 'property benefit exemption' in section 41 of the FBTAA would not apply in the current circumstances. This is because, for the property benefit exemption to apply, the food and drink provided to employees would need to be consumed on the employer's (or a related company's) 'business premises' as defined in subsection 136(1) of the FBTAA. As per the Commissioner's response to Question 1 of this Ruling, the employer does not have any physical business premises, and the cafés/restaurants where business meetings are sometimes held do not constitute the employer's business premises.

In determining whether the benefit provided is exempt under another provision in the FBTAA, it is necessary to consider the criteria as stated in subsection 58P(1) of the FBTAA.

Section 58P of the FBTAA 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.

Guidance on the possible application of section 58P of the FBTAA is contained within Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits (TR 2007/12). In summarising the requirements of section 58P of the FBTAA, paragraphs 8 to 12 of TR 2007/12 state:

8. A minor benefit is an exempt benefit under section 58P where:

•        the notional taxable value of the minor benefit is less than $300; and

•        it would be concluded that it would be unreasonable, having regard to the specified criteria in paragraph 58P(1)(f), to treat the minor benefit as a fringe benefit.

9. In considering the application of the exemption under section 58P it is necessary to look to the nature of the benefit provided and give due weight to each of the criteria. The weight given to each criterion will also vary depending on the circumstances surrounding the provision of each benefit.

10. Section 58P does not apply to exempt all benefits that have a notional taxable value of less than $300.

11. First, there are certain benefits that are specifically excluded from section 58P. These are:

•         airline transport benefits;

•         expense payment benefits where, if the benefit was an expense payment fringe benefit, it would be an in-house fringe benefit;

•         property benefits where, if the benefit was a property fringe benefit, it would be an in-house fringe benefit; and

•         residual benefits where, if the benefit was a residual fringe benefit, it would be an in-house fringe benefit.

12. Secondly, where:

•         tax-exempt body entertainment is provided, and

•         the provider incurs non-deductible exempt entertainment expenditure that is wholly or partly in respect of the provision of entertainment to an employee or an associate of the employee,

such benefits are excluded from consideration for exemption under section 58P, except in two limited circumstances.

Paragraph 17 of the TR 2007/12 explains that paragraph 58P(1)(e) places a threshold of 'less than $300' on the notional taxable value of a minor benefit. This threshold test applies to each benefit provided to an individual employee, and/or each benefit provided to an associate of an employee, to which section 58P may apply. The threshold test is not an upper limit on the total value of minor benefits that any individual employee may receive.

Application to your circumstances

We consider the following factors to determine whether an exempt minor benefit applies in this scenario:

(i)    Is the notional taxable value of the benefit less than $300?

It is unlikely the notional value of the benefit will be less than $300 per employee over the year, considering the frequency of the different meetings held in which food and drink is provided.

(ii)  How frequently and regularly were identical or similar benefits provided?

Paragraph 22 of TR 2007/12 provides that:

...in applying the 'infrequency and irregularity' criterion, it is not appropriate to stipulate the maximum number of times associated benefits that are identical or similar to a minor benefit, or benefits in connection with the minor benefit, can be provided before the criterion is not met. However, the more often and regularly those benefits are provided, the less likely it is that this criterion would be met.

In this case, the meetings are held approximately once per month. The Commissioner regards the benefits as being provided on a frequent and regular basis.

(iii) What is the sum of the notional taxable value of the benefit and any associated benefit?

The total benefit provided for each employee is not known. However, due to the frequency and regular basis on which the food and drink is being provided and the cost of those benefits it is likely to be a substantial amount over a yearly period per employee.

(iv) Are there any practical difficulties in determining the notional taxable value?

There are no practical difficulties for the employer to maintain adequate records to determine the notional value of the benefit.

(v)  What are the circumstances in which the benefit was provided?

All employees of the employer work from home. There are no business premises (owners and directors also work from home). Occasional business team meetings and meetings with clients are held on a regular basis at restaurants and cafés where food and drink are provided to employees.

Conclusion

Having weighed up the above matters, the Commissioner considers that the provision of food and drinks purchased from cafés and restaurants during day-time team meetings and provided to employees will not be an exempt minor benefit under section 58P of the FBTAA. No other exemptions are considered to apply in these circumstances.

Question 3

In respect of the meals and drinks (including alcohol) provided at night-time staff meetings:

a)    Has the employer provided its employees with an expense payment benefit under section 20 of the FBTAA or a property benefit under section 40 of the FBTAA?

b)    Do the meals and drinks (including alcohol) provided meet the definition of a 'meal entertainment benefit' under section 37AC of the FBTAA?

c)    Does an exemption from FBT apply under the FBTAA?

Summary

a)    Yes, the employer has provided its employees with a property benefit under section 40 of the FBTAA.

b)    Yes, meals and drinks (including alcohol) provided during night-time staff meetings meet the definition of a 'meal entertainment benefit' under section 37AC of the FBTAA.

c)     No, the benefits provided would not be considered exempt benefits under section 58P of the FBTAA.

Detailed reasoning

Part a)

The relevant law as outlined in detail in the response to Question 2(a) is also relevant to Question 3(a).

XXXX is the employer of their employees, and it is providing a benefit to its employees, being the food and drink (including alcohol) and/or entertainment provided during night-time staff meetings held at a café or restaurant. They are receiving the benefit because they are employees. Therefore, the benefits are provided in respect of the employees' employment.

Consequently, the provision of food and drink to the employer employees will be a 'fringe benefit' as defined in subsection 136(1) of the FBTAA.

Expense payment benefits

In this situation, it is not compulsory for the employees to attend night-time meetings that are held in restaurants or cafes (where the employer does not have business premises). During these meetings, employees partake in meals and drinks (including alcohol) to which the employer pays for with the company's credit card.

Therefore, for the same reasons as outlined in the response to Question 2(a) of this Ruling, an expense payment benefit has not occurred.

Property fringe benefit

In this situation, the employer has claimed that the purchase of all meals and drinks (including alcohol) are purchased at the cafés or restaurants by using the company's credit card.

Therefore, for the same reasons as outlined in the response to Question 2(a) of this Ruling, these benefits provided to the employees constitute 'property fringe benefits'.

Conclusion

Food and drink purchased for employees during night-time meetings at a restaurant or café and paid for with a corporate credit card will constitute a 'property benefit' under section 40 of the FBTAA.

Part b)

The relevant law as outlined in detail in the response to Question 2(b) is also relevant to Question 3(b).

In this situation, as the employer has provided entertainment by way of food and/or drink, section 37AC of the FBTAA applies in that the provision of meal entertainment has been provided to the recipient (the employee).

Therefore, for the same reasons as outlined in the response to Question 2(b), the meals and drinks (including alcohol) provided to employees at the night-time staff meetings are considered an elaborate meal.

All four factors in paragraph 7 of TR 97/17 have been considered in determining whether the food and drink provided is entertainment. It is considered, on balance, that the provision of food and drink to employees at the café or restaurant during a night-time staff meeting that holds business discussions, and the purpose of which is to foster a sense of team, does not fall within the narrow category of cases where the mere provision of food or drink does not amount to entertainment.

The employer purchases all meals and drinks for their employees from the cafés or restaurants by using the company's credit card. These benefits provided to the employees constitutes a property fringe benefit as defined in subsection 136(1) of the FBTAA.

Conclusion

The expenses incurred by the employer, being food and drinks purchased from cafés and restaurants during night-time team meetings constitute the provision of meal entertainment within the meaning of section 37AD of the FBTAA.

Part c)

As per the Commissioner's response to Question 2(c), it is necessary to determine whether the property fringe benefit is exempt under subsection 58P(1) of the FBTAA.

The following factors have been considered to determine whether an exempt minor benefit applies in this scenario:

(i)    Is the notional taxable value of the benefit less than $300?

It is unlikely the notional value of the benefit will be less than $300 per employee over the year, considering the frequency of all different meetings held in which food and drink is provided.

(ii)  How frequently and regularly were identical or similar benefits provided?

Paragraph 22 of TR 2007/12 provides that:

...in applying the 'infrequency and irregularity' criterion, it is not appropriate to stipulate the maximum number of times associated benefits that are identical or similar to a minor benefit, or benefits in connection with the minor benefit, can be provided before the criterion is not met. However, the more often and regularly those benefits are provided, the less likely it is that this criterion would be met.

In this case, the night-time dinner meetings are held on an ad-hoc basis throughout the year. Having regard to these meetings, along with other team meetings through the year, the Commissioner is of the view that the benefits have been provided on a frequent and regular basis.

(iii) What is the sum of the notional taxable value of the benefit and any associated benefit?

The total benefit provided for each employee is not known. However, due to the frequency and regular basis on which the food and drink is being provided and the cost of those benefits it is likely to be a substantial amount over a yearly period per employee.

(iv) Are there any practical difficulties in determining the notional taxable value?

There are no practical difficulties for the employer to maintain adequate records to determine the notional value of the benefit.

(v)  What are the circumstances in which the benefit was provided?

All employees of the employer work from home. There are no business premises (owners and directors also work from home). Occasional business team meetings and meetings with clients are held on a regular basis at restaurants and cafés where food and drink are provided to employees.

Conclusion

Having weighed up the above matters, the Commissioner considers that the provision of food and drink (including alcohol) provided to employees at night-time meetings will not be an exempt minor benefit under section 58P of the FBTAA. No other exemptions are considered to apply in these circumstances.

Question 4

In respect of the meals and drinks (including alcohol) provided at the annual Christmas party held at a restaurant:

a)    Has the employer provided its employees with an expense payment benefit under section 20 of the FBTAA, or a property benefit under section 40 of the FBTAA?

b)    Do the meals and drinks (including alcohol) provided meet the definition of a 'meal entertainment benefit' under section 37AC of the FBTAA?

c)    Does an exemption from FBT apply under the FBTAA?

Summary

a)    Yes, the employer has provided its employees with a property benefit under section 40 of the FBTAA.

b)    Yes, meals and drinks (including alcohol) provided during the annual Christmas party meet the definition of a meal entertainment benefit under section 37AC of the FBTAA.

c)     No, the benefits provided would not be considered exempt benefits under section 58P of the FBTAA.

Detailed reasoning

Part a)

The relevant law as outlined in detail in the response to Question 2(a) is also relevant to Question 4(a).

XXXX is the employer of their employees, and it is providing a benefit to its employees, being the food and drink and/or entertainment provided during its annual Christmas party held at a café or restaurant. They are receiving the benefit because they are employees. Therefore, it is provided in respect of their employment.

Consequently, the provision of food and drink (including alcohol) to the employer employees will constitute a 'fringe benefit' as defined in subsection 136(1) of the FBTAA.

Expense payment benefits

In this situation, it is not compulsory for the employees to attend the annual Christmas party but it is encouraged. The employer will fly employees who do not live locally to XXXX so they can attend. The event is held either at lunch or dinner at a restaurant where team building exercises occur, a bar tab is available, and a more formal sit down meal is provided. These expenses are paid for by the employer with the company's credit card.

Therefore, for the same reasons as outlined in the response to Question 2(a) of this Ruling, an expense payment benefit has not occurred.

Property fringe benefit

In this situation, the employer has claimed that the purchase of the formal sit down meal, bar tab and entertainment, via team building exercises, are purchased directly from the vendor, by using the company's credit card.

Therefore, for the same reasons as outlined in the response to Question 2(a) of this Ruling, these benefits provided to the employees constitute a property fringe benefit.

Conclusion

Food, drink and entertainment purchased for employees during the annual Christmas party at a restaurant or café and paid for with the employer's corporate credit card will constitute a property fringe benefit.

Part b)

The relevant law as outlined in detail in the response to Question 2(b) is also relevant to Question 4(b).

In this situation, as the employer has provided entertainment by way of food and/or drink, section 37AC of the FBTAA applies in that the provision of meal entertainment has been provided to the recipient (the employee).

Therefore, for the same reasons as outlined in the response to Question 2(b), the meals and drinks (including alcohol) provided to employees at the annual Christmas party are considered an elaborate meal.

All four factors in paragraph 7 of TR 97/17 have been considered in determining whether the food and drink provided is entertainment. It is considered, on balance, that the provision of food and drinks at the café or restaurant during the annual Christmas party, which includes team building activities, does not fall within the narrow category of cases where the mere provision of food or drink does not amount to entertainment.

The employer purchases all meals and drinks for their employees from the cafés or restaurants by using the company's credit card. These benefits provided to the employees constitute a property fringe benefit as defined in subsection 136(1) of the FBTAA.

Conclusion

The expenses incurred by the employer, being food and drinks (including alcohol) purchased from cafés and restaurants during the annual Christmas party will constitute the provision of meal entertainment within the meaning of section 37AD of the FBTAA.

Part c)

As per the Commissioner's response to Question 2(c), it is necessary to determine whether the property fringe benefit is exempt under subsection 58P(1) of the FBTAA.

The following factors have been considered to determine whether an exempt minor benefit applies in this scenario:

(i)    Is the notional taxable value of the benefit less than $300?

It is unlikely the notional value of the benefit will be less than $300 per employee over the year, considering the frequency of the meetings of all the different meetings held in which food and drink is provided.

(ii)    How frequently and regularly were identical or similar benefits provided?

In this case, the annual Christmas party is held once a year. Having regard to these Christmas parties, along with the other team meetings, the Commissioner is of the view that the benefits have been provided on a frequent and regular basis.

(iii)   What is the sum of the notional taxable value of the benefit and any associated benefit?

The total benefit provided for each employee is not known. However, due to the frequency and regular basis on which the food and drink is being provided and the cost of those benefits, it is likely to be a substantial amount over a yearly period per employee.

(iv)   Are there any practical difficulties in determining the notional taxable value?

There are no practical difficulties for the employer to maintain adequate records to determine the notional value of the benefit.

(v)    What are the circumstances in which the benefit was provided?

All employees are invited to attend the annual Christmas party which is held at a café or restaurant. Entertainment in the form of team building exercises, a sit down meal and a bar tab (including alcohol) is provided to all employees.

Conclusion

Having weighed up the above matters, the Commissioner considers that the provision of food and drinks (including alcohol) to employees at the annual Christmas party will not be an exempt minor benefit under section 58P of the FBTAA. No other exemptions are considered to apply in these circumstances.