There are certain types of food and drink expenditure which do not amount to ‘entertainment’. These include:
Sustenance (light refreshments)
- morning and afternoon teas
- light meals (provided no alcohol is served) in the context of a working lunch, eg sandwiches.
Food or drink provided in the course of overnight business travel is not entertainment. Accordingly, the cost of meals consumed by
travelling employees and business clients in meal entertainment. However, if an element of entertainment is introduced (i.e. a floor show),
then the character of the food or drink is changed and it becomes meal entertainment.
The portion of food or drink provided to non-travelling employees or business clients remains meal entertainment where the actual method
of apportioning meal entertainment is used.
Minor items of property
See 'when does a provision arise?' re timeliness and direct connection, and some examples of what is and what is not entertainment are
Costs incurred in providing glasses of champagne, hot meals, theatre tickets, holiday accommodation, hired entertainers, and hired
sporting equipment, have a dynamic and immediate character. Consumption can usually occur immediately. These items of property do not last
beyond initial consumption (or are to be returned at the end of the hire period).
Costs incurred in the giving of items of property, such as bottled spirits, groceries, games, TV sets, VCRs, computers, crockery, swimming
pools, gardening equipment, etc; have an enduring character, and only an indirect nexus to any immediate entertainment. Consumption is
usually delayed. The items of property usually require further steps before they can be consumed, and consumption can occur over a long
Accordingly, the above types of property that do not amount to entertainment are a deductible expense where the requirements of ITAA 1997 s
8-1 are satisfied. However, FBT is payable if the costs incurred are not an exempt property benefit or a minor benefit.
The provision of alcohol is generally entertainment as it has social connotations and therefore provides or affords diversion or
amusement. However, TR 97/17 concludes that a deduction is allowable in some circumstances such as:
Alcohol consumed at seminars and training seminars is generally deductible. Similarly, alcohol provided at ineligible seminars does not
constitute entertainment where it is included in the course cost and the course is otherwise deductible under ITAA 1997 s8-1.
When an employee travelling on business purchases an evening meal at a restaurant which is accompanied by the consumption of some wine,
the ATO concludes in TR 97/17:
“67. In this situation the employee is travelling in the course of his or her employment and the meal purchased is of a type that is
normally consumed at home. It is impractical to suggest that drinking wine in these circumstances changes the nature of the meal. The food
or drink does not amount to meal entertainment. It is consumed by the employee while undertaking work-related travel.”
Warning – light refreshments consumed off business premises
It is common for various employees or business owners to meet offsite (i.e. at a café) for a business-related purpose.
Where ‘light refreshments’ such as soft drinks, coffee and/or light snack (eg muffin) are consumed during these meetings, the ATO has
indicated that the expenditure incurred in these circumstances will NOT have the character of entertainment where the meetings form part
of the normal process of generating income for the business – PBR
as an example.
However, this does not mean that the employer will escape liability for FBT altogether. In particular, an employer would only be able to
escape an FBT liability by relying on the minor benefit exemption s 58P, or the property benefit exemption in s41 of the FBTA Act.
In the case of a minor benefit exemption, an employer would need to demonstrate (amongst other things) that similar or identical benefits
are provided on an infrequent and irregular basis to the particular employee. In these circumstances, it is unlikely to be satisfied where
the sales manager, BDM, etc undertake these meetings on a regular basis at a coffee shop and cafes and receive the benefits
Importantly, the property benefit exemption in s41 will be unavailable in this circumstance. This is because for this exemption to apply,
the property must be provided on a working day on the business premises of the employer.