Can takeaway food be treated as ‘meal entertainment’?

For certain not-for-profit (‘NFP’) employers, there is, in addition to the standard $30,000 or $17,000 FBT exemption or rebate cap a further grossed-up cap of $5,000 for salary packaged meal entertainment.

It is common in many NFP sectors (e.g. healthcare, PBI’s etc) for employers to allow salary packaging of meal entertainment up to the $5,000 cap. Often this will occur by way of a ‘meal card’ being provided by a salary packaging provider to be used by the employee to pay for meal entertainment.

Traditionally, dine-in restaurant style meals are considered meal entertainment whereas takeaway food is generally not taken to be meal entertainment. This places a compliance burden on employers to correctly determine whether a ‘meal’ is meal entertainment (the when, where, why and what approach).

During COVID -19 with in-venue dining at restaurants shutdown/restricted, the ability of employees to utilise their meal entertainment cap was heavily restricted where the in-venue restriction applied.

Is it meal entertainment? The ATO relaxes rules during COVID-19

In recognition of restaurant closures and restaurants moving to take-away food business models (to both survive and meet consumer demand) the ATO has relaxed rules regarding what it will accept as salary packaged meal entertainment for the FBT years 2020 and 2021.

The ATO’s website clarifies that the ATO will not apply compliance resources to scrutinise whether ‘meal’ expenditure is salary packaged meal entertainment:

• for the FBT year ended 31 March 2020 when restaurants and public venues were closed, – meaning takeaway meal purchases will be accepted as (or put another way, not scrutinised as to whether they are) meal entertainment; and
• for the FBT year ending 31 March 2021 where meals are provided by a supplier that was authorised as a meal entertainment provider as at 1 March 2020.

Who is an authorised meal entertainment provider?

An authorised meal entertainment provider is a restaurant that provides sit-down meals and accepts a ‘meal card’ for meal entertainment salary packaging arrangements, but is offering takeaway food during COVID-19 because of Government restrictions.

Where an employer engages a salary packaging provider for meal entertainment salary packaging arrangements, the provider will issue a debit card (the meal card) to the employee with the agreed salary sacrificed amount loaded periodically to the meal card. When food and drink are purchased, the cost will be deducted from the meal card.

Merchant codes are set up for specific items so that the codes identify eligible items and ineligible items in terms of whether the item is meal entertainment. For example, groceries will be identified by the merchant code as ineligible items. Takeaway food would usually be recognised by the merchant code as ineligible items.

For employees who have a salary packaged meal entertainment arrangement set up with their employer, they can continue to order meals from their favourite restaurants using the meal card. This include orders via delivery companies such as Ubereats, Menulog, Deliveroo and the like for the FBT year ending 31 March 2021.

It is expected there will be no change to the merchant codes used to identify ineligible items (such as groceries) for salary packaged meal entertainment. It just means that meals that were previously required to be consumed in a sit-down restaurant can be ordered take away and consumed at home but still treated as meal entertainment without any ATO scrutiny until the end of the 2021 FBT year.

This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.