31 March, being the end of the fringe benefits tax (FBT) year, is fast approaching and now is the time to ensure that certain obligations under the FBT law are being satisfied before the end of that year.
Below we discuss the FBT implications of employers supplied food and drink to their employees.
The provision of meals by an employer to an employee gives rise to several types of fringe benefits:
An entertainment fringe benefit arises where an employer supplies entertainment:
In most cases, the supply of meals by an employer will be an entertainment fringe benefit unless the exempt property fringe benefit rules, the otherwise deductible rule or the board fringe benefits rules apply (see below).
A meal entertainment fringe benefit can be calculated using any of the following three methods:
Employers must elect to use one of the above methods for the FBT year. Employers are permitted to choose the most tax efficient method.
Your Nexia Edwards Marshall Adviser can assist you in deciding which calculation method is best for your business.
Food and/or drink supplied to an employee is an exempt benefit if food and/or drink is both provided and consumed on the employer’s premises on a working day. Examples of exempt benefits are morning and afternoon tea, light meals and food prepared in an in-house dining facility.
This exemption does not apply to:
A fringe benefit may be supplied by another person on behalf of an employer or to another person on behalf of an employee (for example to employee’s relative).
Meals provided by employers are not subject to FBT, if the meal would be otherwise deductible under the income tax law if the employee had incurred the expense directly e.g. meals when employees are travelling overnight on company business. The employee must sign a declaration to this effect.
The value of board fringe benefits is limited to $2 per meal per day under the FBT law. To qualify as a board fringe benefit the following conditions must be satisfied under the FBT law:
For further information regarding meals and FBT speak to Raoul Stevenson or your Nexia Edwards Marshall Adviser today.
The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.