After 1986, the federal government moved to close the loophole to ensure they weren’t missing out on a source of taxation. Essentially, these represented a tax loophole. Fringe benefits are “payments” – literally, benefits – made to employees in the form of something other than salary or wages. In 1986, these meals became known as “fringe benefits”, and the tax situation regarding them has been somewhat complicated ever since. Rather than giving pay rises (on which the employees would be taxed and the businesses’ payroll tax, if applicable, would increase), the businesses just bought their staff more and increasingly lavish lunches! Fighting back on the fringe The businesses were claiming tax deductions for the restaurant meals, but the staff were not reporting the meal benefits as income. In the mid-1980s, the federal government recognised they were being dudded.
It also became commonplace for employees to have their lunches regularly paid for by their employer. While this was partly because businesses became adept at doing deals and winning favour at the dining table, it was also much simpler at that time to claim these as tax deductions. In the 1970s and 80s, long lunches were par for the course in the business community. And they’re fun! So surely they are tax-deductible, right? Fringe benefits – dining out on deductions You can’t avoid those costs - they’re legitimately needed for the business. You might take the team out for a celebration lunch, or an exciting new prospect out for a steak. Your prospective and existing clients (and staff) will enjoy and respond well to being treated well.
There’s coffee meetings, long lunches, dinners, functions and so on. The Background story of Meals and EntertainmentĪ strong team culture and an effective sales process are two key ingredients of a successful business, and both can involve wining and dining.
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