Entertainment: What is the tax situation

Claiming entertainment expenses some important facts :

The law states that

1. Employee Entertainment: Entertainment expenses for employees, such as staff parties or social events, were generally not deductible. – subject to FBT
2. Record-keeping: It’s crucial to maintain accurate records of your entertainment expenses, including receipts, invoices, and details of the event or meal, to support your deduction

Entertainment Benefits: If you provide entertainment benefits to employees or their associates, such as tickets to events, restaurant meals, or holiday accommodation, these may be subject to FBT.

Minor Benefits Exemption: There is an exemption for minor benefits, which allows for some entertainment expenses to be exempt from FBT if they are less than a certain threshold (as of my last update, the threshold was $300 per benefit for employees and their associates).

Employee vs. Client Entertainment: Different rules may apply to entertainment provided to employees and entertainment provided to clients or potential clients. Entertainment provided to employees is generally more likely to be subject to FBT.

Promotion – can be claimed, but be careful – is it business promotion open to promoting the business and deemed advertising, or is it a select group and deemed entertainment? Be careful, and please check.

Record-keeping: Accurate record-keeping is essential for FBT purposes. You should keep detailed records of any entertainment expenses, including who received the benefit, the nature of the benefit, and the date it was provided.

FBT Returns: Employers must report and pay FBT annually through their FBT return. This return is typically due on May 31 each year. We can add it back via a loan adjustment if it’s just you.

Coffee meetings: Can you claim a tax deduction for the cost of holding your meeting at a café with a customer?

Businesses can provide light refreshments at meetings held on their business premises. They can also claim a deduction for the cost of these refreshments.

The ATO considers this not to be meal entertainment.  But taking a customer to a café and consuming a coffee or a meal is considered entertainment and not deductible.

What if you run your business from home – Sadly, the same rules apply. There is no deduction for coffee meetings despite not having anywhere to take them.

A reminder you can’t claim the tax deduction, nor can you claim the GST.