Can I salary package meals and entertainment in Australia?
Yes, you can salary package meals and entertainment in Australia, typically as a fringe benefit. This allows eligible employees, especially those in FBT-exempt organisations, to pay for these expenses from their pre-tax income, potentially reducing taxable income.
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How it works in practice
Understanding Salary Packaging for Meals & Entertainment
Salary packaging, also known as salary sacrificing, involves an arrangement with your employer to pay for certain expenses from your pre-tax salary. For meals and entertainment, this usually means your employer provides a benefit (like a corporate credit card for entertainment) or reimburses you for expenses, rather than you paying directly from your post-tax income.
Fringe Benefits Tax (FBT) Implications
While salary packaging reduces your taxable income, these benefits are generally subject to Fringe Benefits Tax (FBT) for your employer. However, specific rules and exemptions apply, particularly for employees of FBT-exempt or FBT-rebatable organisations such as public hospitals, charities, and some non-profit organisations. These organisations often have concessional FBT treatment or capping thresholds, making salary packaged meals and entertainment a valuable benefit for their employees.
Eligible Expenses
Eligible expenses generally include dining out with colleagues or clients, attending social functions, or providing hospitality. The ATO distinguishes between "meal entertainment" and minor benefits, with different tax treatments. For the benefit to be salary packaged, it must typically be provided by your employer as part of a formal arrangement.
Important exceptions
Salary packaging of meals and entertainment is primarily beneficial for employees of certain FBT-exempt organisations, such as public hospitals, public benevolent institutions, and some non-profit entities. These organisations have specific capping thresholds for FBT-exempt benefits.
For most other employers, while possible, the FBT implications make it less common for general employees. The benefit must be an actual fringe benefit provided by the employer, not a reimbursement for personal expenses not part of a salary sacrifice arrangement. The arrangement must be prospective, meaning agreed upon before the income is earned. Normal daily food and drink expenses are not typically eligible.
What you should do now
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Check Your Employer's Policy: Inquire with your HR or payroll department if your employer offers salary packaging for meals and entertainment. Ensure you understand their specific policies and any associated fees.
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Understand FBT Exemptions: Determine if your employer is an FBT-exempt organisation (e.g., public hospital, charity). This significantly impacts the value of salary packaging these benefits.
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Formalise the Agreement: If eligible, enter into a formal, written salary packaging agreement with your employer before you incur the expenses. This is crucial for tax purposes.
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Track Your Expenses: Keep detailed records, including receipts, for all meals and entertainment expenses you intend to salary package. Provide these to your employer as required for reimbursement or reporting.
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Review Your Pay Slips: Regularly check your pay slips to ensure the salary packaged amounts are correctly deducted and that your net pay and superannuation contributions are accurate.
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