And 4) it must not be of a capital nature.įor gifts to others – think of suppliers, advisers, competitors – you need to go back to s8-1 ITAA97.

3) It must not be a personal gift to family or friends.

2) The gift must be to produce future assessable income and and not exempt income or NANE. Business ExpenseĪny gifts of food and drink to former or current clients are a tax-deductible business expense thanks to TD 2016/4. Examples are wine bottles, spirits, boxes of chocolates and restaurant vouchers. # 1 GiftsĪnything you give to keep is a gift. And you now need to work out what counts as a business expense and what counts as entertainment. These are the six ways you might pay for food and drinks. # 6 And you might pay a Living-From-Home-Allowance (LAFA) that covers meals but usually also accommodation when you send an employee on a secondment. # 5 You might pay your employees a travel allowance to spend on food and drinks as they see fit. # 4 You might reimburse your employees or others later after they present you with the restaurant bills and hotel invoices. Your employees or others might pay for restaurant bills and room service using the business’ credit card while travelling overnight. Think of restaurants, cafes and social venues and the taxi ride to get there. You might invite your clients or team to a cafe or restaurant and pay the bill. Think of staff lunches, business dinners, Christmas parties. The restaurant vouchers clients took back to their office. The little lolly bags you handed out at a client event. # 1 You might buy the food or drink and give it as a gift. Anything you give to keep or consume later is a gift. When you think about it, there are six scenarios where you might pay for food and drinks. But then you also don’t get the tax deduction and GST credit. If a benefit is exempt from FBT, then you don’t have to pay FBT. And you also get the GST credit since GST just follows income tax. Div 32 ITAA97 doesn’t apply to any expenses you pay FBT on. When you pay FBT on an expense, you can claim a tax deduction. So if an exemption applies, you don’t pay FBT on that value. There are quite a few exemptions in the FBT Act. And so entertainment provided to employees is a fringe benefit.Ī fringe benefit might be subject to fringe benefit tax (FBT). Fringe BenefitĪny benefit you provide to employees or their associates directly or through an arrangement in relation to their employment is a fringe benefit. You can’t claim a tax deduction for any entertainment per Div 32 ITAA97. When the food and drink doesn’t count as a business expense, then it is entertainment. And there is no FBT, even when you wine and dine employees. You get an input tax credit (“GST credit”) per Div 11 GST Act. When your costs for food and drink count as a business expense, you get a tax deduction per s8-1 ITAA97. Business Expenseīusiness expenses are good. If something is indeed entertainment, then it is a fringe benefit when provided to employees. S32-10 ITAA97 defines entertainment as ‘entertainment in the way of food or drink’ and s136-1 of the FBT Assessment Act (FBTAA) adopts that definition, but nobody says anywhere that the consumption of food and drink is always and every time without fail entertainment. You can provide food or drink without providing entertainment. Business Expense v Entertainmentįood or drink is not necessarily entertainment. The tax treatment of food and drink depends on whether those expenses count as a business expense or as entertainment. The problem is that the rules around entertainment are confusing. If you can tax deduct food and drink as a business expense without incurring FBT, you will save a lot of tax. The tax treatment of food and drink you incur in your business will affect your tax position.

Live entertainment expense bar