If you work for a not-for-profit employer or the Northern Territory Public Health Service, you may be eligible to salary package $2,650 per year by using the meal and entertainment benefit on meals, entertainment, and even accommodation. We interviewed our General Manager, John Heinke to give you more information about this benefit.
What is a Meal and Entertainment Card?
Meal and Entertainment cards are a type of Australian tax office salary packaging available to employers who work for the NT public health service or those who qualify as not-for-profit (an entity set up for the benefit of members) e.g. a trade union or a public Benevolent Institution (charity for tax purposes) e.g. Royal flying doctor service. The meal entertainment card allows employees to expense food and drink, entertainment, holiday accommodation, and even venue hire while using pre-tax dollars.
How much can an employee save each fortnight or each year?
In actual dollar terms, the employee can package $2,650 per annum. This can be spent on meals, accommodation and function hire using pre-tax dollars.
Any employee of a qualified employer can access the meal and entertainment card.
So, it’s an actual legal benefit offered to employees and is approved by the ATO?
Yes. There are rules around how much can be used, who can qualify to use the card and, most importantly, rigid ATO reporting requirements. But if your employer’s status qualifies for this approved tax benefit then employees can access the tax savings.
Why would an employer choose to offer this benefit to staff?
To be able to provide $2,650 of an employee’s salary in a tax-free method means the employee is financially better off. At a 30% tax rate, the tax saving is $795. Salary Packaging Australia can provide this benefit to employers at no cost.
How else can this be used as a benefit and is it all just about meals out and dining or can I use it in other ways?
The Meal and Entertainment Card can be used for;
- Venue Hire
- Events such as 21st birthdays or engagements fall within the definition.
- Holiday accommodation
- From a five-star resort to a caravan park satisfies the accommodation rule
- That ship cruise you have always wanted to go on.
- Café, restaurant or hotel meals all satisfy the criteria
- Food and Beverages
- Consumed at special occasions such as weddings and birthdays also satisfies the criteria.
- Family and friends
- Can be included in all of the above expenditure
What can’t I include as a benefit with the Meal and Entertainment Card?
But as we know with any tax legislation the rules must be followed, therefore you cannot include;
- Takeaway food or bottle shop purchases
- Regular groceries
- Hiring outside of meal and venue hire e.g. an Elvis impersonator
- Movies or musicals
- Flights to and from your five-star resort
Does this mean that my annual holiday just got cheaper? Can I use it to go overseas or is it for Domestic travel only?
Yes, your annual holiday suddenly can be paid in tax-free dollars. You can use the benefit overseas but be mindful of any additional costs due to currency exchange.
It sounds too good to be true!
The meal and entertainment benefit accrues to employers that either work for NT Public Health, have not for profit status or qualify as a charitable organisation. Due to these classifications, the tax system allows the employer to add value and incentive to their employee’s wages. This adding value is achieved by using the Fringe Benefits Tax legislation. The reality is that the tax system allows it and therefore the employee is within their rights to exercise the benefit.
Do I need to keep receipts?
Yes. Only if you are hosting an event, you will need to keep a record of the event and the attendees. This is just like claiming a deduction with your tax return. It is expected that you retain itemised receipts for all purchases made while using the benefit outside of the card, including venue or holiday accommodation. However, when charging expenses using the meal and entertainment card receipts are not required to be retained.
If you wish to use the SPA money management tool you will be reminded that the expense is of a meal and entertainment nature immediately and you can lodge a photo of the receipt electronically to satisfy ATO requirements.
What if I don’t spend my allocated funds by the end of the FBT year?
Your funds will roll over, but they do not accrue as a benefit. Unfortunately, if you miss the FBT year, you miss the benefit.
What about my HECS and HELP repayments
The $2,650 benefit is reportable. This means that a reportable fringe benefit will appear on your group certificate in the amount of $5,000. You will not pay tax on this $5,000 but it will increase your assessable income. This may have an impact on your repayment of the debt. We suggest you contact your financial advisor for advice where required.