Question
Employees are reimbursed for meals and 2 standard drinks as part of our general policy when dining while travelling on business trips involving an overnight stay.
However, sometimes they consume more than 2 standard drinks. If we reimburse them for the drinks over and above the 2 standard drinks allowed, how is this to be treated for FBT purposes?
Answer
Where an employee is travelling on a business trip, the consumption of food & drink – including alcohol – does not constitute meal entertainment based on the ATO’s views in TR 97/17 – specifically refer to Examples 3.1 and 3.2 in the ruling.
So it seems there does not appear to be an upper limit insofar as how much alcohol can be consumed except the physical limit of the particular employee!
Where, however, the food and drink is consumed in association with other forms of entertainment – such as a floor show – the character of the food and drink will change to that of entertainment.