Supplementary Explanatory Memorandum
(Circulated by authority of the Treasurer,the Hon Ralph Willis, MP)Explanation of amendments
These amendments make minor changes to Schedule 1 of the Bill to correct drafting oversights and remove the proposed living-away-from-home provisions contained in Schedule 2.
Amendments 1 and 2: Income tax deductions under 50/50 split method for meal entertainment
These amendments concern the income tax deduction under new section 51AEA in the Income Tax Assessment Act 1936 for employers who elect to use the 50/50 split method for calculating the taxable value of meal entertainment fringe benefits. As currently drafted, new section 51AEA would allow any employer a deduction for 50% of expenses for meal entertainment even though the employer does not incur an FBT liability in respect of the entertainment.
The purpose of the 50/50 split method is to simplify calculations and record keeping requirements for employers who provide meal entertainment benefits to both employees and non-employees by providing a simple, arbitrary method of apportionment for expenses between employees and non-employees. It was never intended to apply to employers who provide meal entertainment benefits only to non-employees.
The amendments will confine the entitlement to a deduction under section 51AEA to employers who have provided meal entertainment fringe benefits (i.e., arising from meal entertainment provided to employees). This will ensure that an employer is entitled to a deduction of 50% of meal entertainment expenses only where an employer has incurred an FBT liability in relation to meal entertainment fringe benefits.
Amendment 3: Living-away-from-home benefits
This amendment removes the proposed living-away-from-home provisions contained in Schedule 2.