ATO ID 2004/446: GST and food and/or drinks provided for no charge to an employee in respect of their employment
Date of decision: 4 March 2004
Business line: Indirect Tax

Issue
When food and/or drinks are supplied to an employee (or an associate of the employee) by the entity, an employer, for no charge, is the amount of goods and services tax (GST) on that supply calculated to be zero in accordance with section 9-70 of the New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision
Yes, when food and/or drinks are supplied to an employee (or an associate of the employee) by the entity, for no charge, the amount of GST on that supply is calculated to be zero in accordance with section 9-70 of the GST Act.

Facts
The entity is an employer that is registered for GST. The entity provides an employee (or an associate of the employee) with food and/or drinks. The food and/or drinks are supplied, for no charge, to the employee (or an associate of the employee). The supply of the food and/or drinks to the employee (or an associate of the employee) satisfies the requirements of section 9-5 of the GST Act as being a taxable supply. The consideration provided for the supply of food and/or drinks is the employee's services. The supply of the food and/or drinks to the employee (or an associate of the employee) is provided in respect of the employee's employment. The supply of the food and/or drinks is a fringe benefit for the purposes of the GST Act, regardless of whether or not it is an exempt benefit under section 136 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Reasons for decision
Summary: Section 9-70 of the GST Act provides that the amount of GST on a taxable supply is 10% of the value of the taxable supply. Subsection 9-75(1) of the GST Act provides that the value of a taxable supply is the price x 10/11 and if the consideration for the supply is not expressed as an amount of money, or not only in money, the price of the supply is the sum of the amount of money, if any, and the GST inclusive market value of the consideration where the consideration is not expressed as an amount of money. The consideration provided for the entity's taxable supply of food and/or drinks is the employee's services and as such, the consideration is not expressed as an amount of money. Therefore, the price for the supply is the GST inclusive market value of the employee's services. However, the supply of food and/or drinks is a fringe benefit for the purposes of the GST Act and the way the value of a supply of a fringe benefit is worked out is different than for other supplies. Subsection 9-75(3) of the GST Act provides that, in working out the value of a supply where: the price of the supply is the amount of consideration in the form of the recipients contribution made in the relevant tax period. As such, in working out the value of the entity's taxable supplies of food and/or drinks, the price of the supply of the fringe benefit is limited to the amount of the recipients contribution. The term 'recipients contribution' is defined in section 195-1 of the GST Act to have the meaning given by subsection 136(1) of the FBTAA, but includes any consideration paid in respect of a benefit that is an exempt benefit for the purposes of that Act. Under subsection 136(1) of the FBTAA, the term 'recipients contribution' is defined in relation to a fringe benefit, other than an expense payment fringe benefit, to mean the amount of any consideration paid to the provider or to the employer by the recipient of the benefit or the employee in respect of the provision of the recipient's property reduced by any reimbursement paid to the recipient in respect of that consideration. The above definitions mean that the application of subsection 136(1) of the FBTAA 1986 and section 195-1 of the GST Act is such that, regardless of whether or not the supply is an exempt benefit under the FBTAA, the recipients contribution is limited to any consideration paid to the entity in respect of the provision of the food and/or drinks. The entity provides the food and/or drinks to the employee (or an associate of the employee) for no charge. The consideration provided for the entity's supply is the employee's services. As there is no charge for the food and/or drinks, the employee (or an associate of the employee) has not made any contribution towards the cost of the food and/or drinks. As the price of the entity's taxable supplies of food and/or drinks is limited to the amount of the recipients contribution and the employee (or an associate of the employee) has not made any contribution, the value of the entity's taxable supplies of food and/or drinks is zero. Therefore, when food and/or drinks are supplied to an employee (or an associate of the employee) by the entity, for no charge, the amount of GST on that supply is calculated to be zero in accordance with section 9-70 of the GST Act.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-70 subsection 9-75(1) subsection 9-75(3) section 195-1
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2001/3
Subject references: Goods and services tax GST consideration GST/FBT interaction