Employers often give employees a meal allowance when they need to remain at or near the workplace during mealtimes. Some employers provide their employees with clothing or an allowance to buy clothing for work. This is generally treated as a benefit allowance. In most situations it will be taxable.
A tax exemption is available for the full amount of meal payments, including reimbursement payments and allowances, when the employee is far away from their normal work location on business. There is a 3-month time limit on this. This tax exemption also applies to meals or light refreshments off work premises during the employee’s work.
A tax exemption may apply to payments for light refreshments (such as biscuits and coffee) when:
- the employee's duties mean they're away from their workplace for most of the day
- the employer would normally provide the employee with similar refreshments.
Impact on other exemptions
These rules do not affect exemptions that apply to overtime meal payments, sustenance allowances or rules that limit employers' deductions of entertainment expenses.
These exemption rules do not apply if fringe benefit tax is payable on meals directly provided by the employer.
Payments provided to cover the cost of distinctive work clothing are exempt from tax. Distinctive work clothing includes uniforms or specialist clothing that are not very suitable for private use but are necessary for a particular occupation. Examples of this are:
- overalls and protective clothing worn for health and safety reasons.
Payments paid to police officers to meet the costs of plain clothes allowances are also exempt from tax, if certain conditions are met.