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ATO Interpretative Decision

ATO ID 2005/122

Goods and Services Tax
GST and entitlement to input tax credits for acquisitions made to supply meals to clients in an in-house dining facility

FOI status: may be released
Status of this decision: Decision Current

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Issue

Is the entity, a business operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Service Tax) Act 1999 (GST Act), for goods and services tax (GST) included in acquisitions made to provide meals to clients in an in-house dining facility when, in accordance with section 32-70 of the Income Tax Assessment Act 1997 (ITAA 1997), the entity includes $30 for each meal in its assessable income?

Decision

Yes, the entity is entitled to an input tax credit under section 11-20 of the GST Act for GST included in acquisitions made to provide meals to clients in an in-house dining facility when, in accordance with section 32-70 of the ITAA 1997, the entity includes $30 for each meal in its assessable income.

Facts

The entity is a business operator and is registered for goods and services tax (GST).

The entity made acquisitions to provide meals to clients in an in-house dining facility. The supplies to the entity were taxable supplies. The meal is not provided at a party, reception or other social function. In accordance with section 32-70 of the ITAA 1997, the entity includes $30 per meal as assessable income for meals provided to clients.

Reasons for Decision

Section 11-20 of the GST Act provides that an entity is entitled to an input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an acquisition is creditable if:

·
 it acquires anything solely or partly for a creditable purpose
·
 the supply to it is a taxable supply
·
 it provides, or is liable to provide, consideration for the supply, and
·
 it is registered or required to be registered for GST.

The entity made the acquisitions in the course of its business, the supplies to it were taxable supplies and it is registered for GST. Therefore, the requirements in section 11-5 of the GST Act are satisfied.

However, Division 69 of the GST Act provides that some acquisitions that are not deductible under the ITAA 1997 are not creditable acquisitions.

Subsection 69-5(1) of the GST Act provides that an acquisition is not a creditable acquisition to the extent that it is a 'non-deductible expense'. Of relevance to this situation is paragraph 69-5(3)(f) of the GST Act which provides that entertainment expenses that are not deductible under Division 8 of the ITAA 1997 because of Division 32 of the ITAA 1997 (which deals with entertainment expenses), are non-deductible expenses.

Meal entertainment provided to clients on the business premises of the employer is generally not deductible for income tax purposes (section 35-2 of the ITAA 1997). However, item 1.2 in the table in section 32-30 of the ITAA 1997 provides an exception where the meal is provided to an individual (other than an employee) in an in-house dining facility (not at a party, reception or social function) and the employer includes $30 in assessable income in respect of the meal under section 32-70 of ITAA 1997.

The entity has provided a meal to a client in an in-house dining facility. The meal is not provided at a party, reception or other social function and, in accordance with section 32-70 of the ITAA 1997, the entity includes $30 per meal as assessable income. Therefore, Division 32 of the ITAA 1997 does not prevent the entity from deducting the expenses under section 8-1 of the ITAA and the acquisitions are not non-deductible expenses.

As such, the entity is entitled to an input tax credit under section 11-20 of the GST Act for GST included in acquisitions made to provide meals to clients in an in-house dining facility when, in accordance with section 32-70 of the ITAA 1997, the entity includes $30 for each meal in its assessable income

Date of decision: 20 August 2002

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 11-5
   section 11-20
   Division 69
   subsection 69-5(1)
   paragraph 69-5(3)(f)

Income Tax Assessment Act 1997
   section 8-1
   section 32-5
   section 32-30 table item 1.2
   section 32-70

Related ATO Interpretative Decisions
ATO ID 2005/121

Keywords
Goods and services tax
Non deductible expenses
GST supplies & acquisitions
Creditable acquisition
Entertainment expenses

Date of publication: 13 May 2005

ISSN: 1445-2782

 


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