Deductibility of Expenses

TABLE TO ASSIST WITH CLASSIFICATION OF ENTERTAINMENT EXPENSES

Expense
Situation Income tax FBT GST classification
Employee takes two clients Employee s portion $50 is Employees portion is not Dont claim GST Entertainment
to lunch at a restaurant non-deductible subject to FBT assuming it is expense
cost $150 a minor and infrequent
fringe benefit.


Clients portion $100 non- Clients portion No FBT Do not claim Entertainment
deductible GST expense
Employee has meal in Tax deductible No FBT (otherwise Claim GST Travelling
restaurant while travelling deductible rule) Expense
on business trip.

Employer provides Tax deductible Exempt from FBT Claim ITC Staff amenities
sandwiches and juice for when GST
working lunch in office credits
(not entertainment) available

Employer provides Non-deductible (its an Exempt from FBT on account Do not claim Entertainment
substantial lunch with entertainment expense of being minor and GST
wine for employees in because of the large meal infrequent
office but not in canteen and the provision of
alchohol)
Employer provides social Non-deductible on account Exempt from FBT assume Do not claim Entertainment
function for employees in of being entertainment minor and infrequent GST
office

Employer provides social Cost per employee Cost per employee Exempt Do not claim Entertainment
function for employees Non-deductible (assume benefit GST expenses
and associates in office because its minor &
infrequent)
Cost per associate Cost per associate Claim GST Entertainment
Tax deductible (as FBT is Taxable fringe benefit (Consider not
levied on the benefit) providing this
benefit to
associates to
avoid FBT
impact)
Christmas party provided Not tax deductible Exempt fringe benefit as it is Do not claim Entertainment
to employees & clients provided on the business GST
- Provided on the premises
business premises
Christmas party provided Not tax deductible (provided No FBT if an exempt fringe Do not claim Entertainment
to employees & clients the minor and infrequent benefit if the total cost of GST
- Not provided on the benefit exemption applies) party per employee is less
premises than $300 per employee.
Gifts provided to Not tax deductible (assume No FBT if an exempt fringe Do not claim Entertainment
employees at Christmas that it is a minor & benefit if the total cost of GST
time infrequent benefit) party per employee is less
than $300 per employee.
Gifts made to clients in the Tax deductible Not subject to FBT as the Claim GST Client gifts
ordinary course of expense is not classed as where available
business where they are Entertainment under s 32-5
not included in the class of (TR 94/55 & ID 2004/427)
expenses listed above.