Beware of the ATO Grinch Coming to your Party
Except in limited circumstances, deductions are generally not allowable for entertainment expenses.
‘Entertainment’ is defined in s32-10 as:
(a) entertainment by way of food, drink or recreation, or
(b) accommodation or travel to do with providing entertainment by way of food, drink or recreation.
Below is a summarization list to be aware this year
| Benefits Provided | FBT Liability | Income Tax Deduction | GST Claim |
| Christmas party/Meal Entertainment | |||
| Food & Drink Provided on Business Premises
Employees Property Fringe Benefit (actual) Associates Property Fringe Benefit (actual) Minor Benefit Clients
|
No(1)
Yes(2) No(3) No |
No
Yes No No |
No
Yes No No |
| Off Premises (eg; restaurant)
Employees and / or associates Property, expense payment or residual fringe benefit (actual) Minor Benefit Clients |
Yes(2) No(3) No |
Yes No No |
Yes No No |
| Taxi Fares: Property or Expense Payment Fringe Benefit
Employees From work premises to function (or vice versa) From Function to non-work premises (or vice versa) Minor Benefit (if not exempt taxi travel) Associates Any taxi travel (irrespective of origin or description) Minor Benefit |
No(4) Yes(2) No(3)
Yes No(3) |
No Yes No Yes No |
No Yes No
Yes No |
| Gifts | |||
| If Gifts constitutes ‘entertainment’ to;
Employee or Associate. Property Fringe Benefit (actual) Minor Benefit Client / Customer |
Yes(2) No(3) No |
Yes No No |
Yes No No |
| If Gift(s) not constitutes as ‘entertainment’ to;
Employee or Associate. Property Fringe Benefit (actual) Minor Benefit Client / Customer |
Yes(5) No(3) No |
Yes Yes Yes |
Yes Yes Yes |
- Exemption under s.41 FBTAA – provision of food and drink on premises on a working day. Applies if actual method used.
- As this expenditure constitutes ‘meal entertainment’, business may elect to apply the 50/50 split or 12 week register method to value fringe benefits (FB). The relevant income tax and GST implications follow.
- Minor benefit exemption under s58 FBTAA – must be less than $300 per benefit and satisfy relevant criteria. See TR 2007/12 applies only if “actual” method used.
- Exemption under s58Z FBTAA. Not applicable to associates of employees, applies only if the ‘actual method is applied
- Must Value using actual method only