Employees can arrange with their employers to have their everyday lunch costs included in their salary package. Employees are welcoming this extra benefit with open arms, as, once implemented, the agreement can potentially save employees up to half of their weekly lunch costs. As the cost of living continues to rise, for those who have their lunch salary sacrificed it can be likened to receiving a $10 - $15 a week after-tax pay rise. In some cases it can possibly even help to improve staff retention rates.

From an employer point of view the implementation of this practice is relatively simple. Similarly, it does not significantly increase the financial strain on the company. Under Section 14 of the FBT Act, employees’ daily lunches that are provided by the employer are FBT exempt. The employer is also entitled to claim GST input tax credits as well as tax deductions on the expenditure.

In order for the FBT exemption to apply to everyday lunches there are a few conditions that must be met. The provided meal must:

• be provided only to current employees (that is, meals provided to associates of employees are not included)

• be consumed on the business premises

• be provided during a working day

• be provided as a property benefit  (this means the employer must pay directly for the costs associated with providing the meal)

It is important to note that if an employer simply reimburses an employee for the cost of their daily meal, the expense payment benefit is not eligible for the FBT exemption. For payment summary purposes FBT exempt lunches are a non-reportable benefit. This means that the cost of lunches provided under the salary packaging agreement are not included in the total when calculating Medicare surcharge and the HECS scheme.

Whilst there is no daily monetary limit that must be met before the meal is FBT exempt employers should be aware that the more expensive the cost of the meal is, this increases the likelihood of the meal being considered “meal entertainment”.