Entertainment expenses guideline
Entertainment
The subject of business entertainment expenses can seem a bit complicated at first. This is a summary of some of the more common issues you may encounter. But please contact me if you have any questions or any situations that are slightly different to these.
Business expenses for entertainment can be either 100% deductible or 50% deductible depending on the circumstances.
Examples of entertainment expenses that are completely business related and therefore 100% deductible are as follows:
Cost of food for an employee while travelling for business
Cost of food at a conference for work if the conference is for more than 4 hours (although light refreshments 100% deductible)
Cost of food as part of a work meeting - eg lunchtime management meeting
Gym membership for an employee
Cost of morning and afternoon tea for your employees
Cost of taking a client to dinner while you are overseas
Examples of entertainment expenses that are not completely business related and therefore only 50% deductible are as follows:
Cost of food, involving a business contact, while travelling for business
Cost of food provided to employees either at work or outside work (eg Friday night drinks)
Cost of corporate box or other sports event
Cost of staff Christmas party
Cost of taking a client to dinner
FBT (Fringe benefits tax)
Once you have classified the entertainment cost as either 100% or 50% deductible, you need to determine whether it not it is also subject to FBT.
If the entertainment cost is 100% deductible it may be liable for FBT.
If the entertainment is 50% deductible it is usually not liable for FBT (however there are some exceptions - eg if the employee can choose where and when to use the benefit).
Another point to remember is that you can provide up to $1200 per employee per year of unclassified benefits, without being liable for FBT.