What is meal entertainment?
Meal entertainment generally means food and drink at restaurants, cafés, pubs and clubs, takeaway eaten on the premises, and accommodation for holidays. Your provider issues a card that is used like a normal debit or credit card, with your pre-tax salary funding it.
What is the actual cash limit?
The $2,650 cap is measured on grossed-up value. Dividing by the Type 2 gross-up rate of 1.8868 gives roughly $1,404 of cash salary a year. Some providers calculate using a different gross-up rate, so the exact cash limit shown by your provider can differ.
How much does it save?
At the 32% marginal rate (a $90,000 salary), packaging about $1,404 saves roughly $450 a year. It is only worthwhile if you would actually spend that much on dining and accommodation anyway, and any provider fee is lower than the tax saving.
Common mistakes
The most common problems are using the card on ineligible items, unused balances at the end of the FBT year and forgetting that the amount adds to your reportable fringe benefits amount. See the RFBA guide for how that works.