Entertainment Expenditure

With the festive season imminent, we remind you that deductions for “entertainment expenditure” are generally limited to 50% of the cost incurred. There are however a number of exemptions which may enable you to claim a full deduction.

Below is a summary of the deductions available:

Activity Deductible Subject
  50% 100% to FBT
Morning & Afternoon Tea No Yes No
Taking clients (existing or potential) to lunch Yes No No
Friday Drinks, Christmas Party Yes No No
Gift Baskets (food & beverages) * Yes No Yes **
Gift Baskets (excluding food & beverages) * No Yes Yes **
Dinner out of town (no client present) No Yes No
Overseas travel, including meals with clients No Yes No
Meal or Beverage Vouchers (as an award) * Yes No Yes **
Other Vouchers (excluding food & beverages) * Yes No Yes **
Meal Allowance paid to staff working overtime No Yes No

* Gift baskets of food and beverages and meal vouchers are only 50% deductible however non-food and beverage items are 100% deductible. To get the maximum tax deduction it is necessary to calculate or apportion the costs between 50% and 100% deductible items. In many cases the cost associated with this will be more than the expense and therefore we suggest claiming 50% only.

** Although this expenditure falls within the FBT rules, FBT will generally only be payable if the $1,200 per employee (max $22,500 per employer) is exceeded.