Is it Entertainment? Travel? Staff Expense?
Let’s break it down to see what the expense is and will FBT apply
What is Entertainment:
It can provide by the way of food, drink, or recreation and accommodation or travel in connection with entertainment. Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theatres, at sporting events, or on hunting, fishing, vacation, and similar trips. Entertainment includes the cost of a meal you provide to a customer, or client, whether the meal is a part of other entertainment or by itself. A meal expense includes the cost of food, beverages, taxes, and tips for the meal. Not all expenses for meals and entertainment are deductible.
You can deduct ordinary and necessary expenses to entertain a client, customer, or employee.
In some cases, business is generally not considered to be the main purpose when business and entertainment are combined on hunting or fishing trips, or on yachts or other pleasure boats. It is not necessary to devote more time to business than to entertainment. However, if the business discussion is only incidental to the entertainment, it is not directly related.
If the entertainment takes place in a clear business setting and is for your business or work, the expenses are considered directly related. The following situations are examples of entertainment in a clear business setting:
- Business meal with a supplier at a local restaurant,
- Entertainment at a convention where business goodwill is created through the display or discussion of business products.
- Entertainment of business and civic leaders at the opening of a new hotel or play when the purpose is to get business publicity rather than to create or maintain the goodwill of the persons entertained.
- A meeting or discussion during what is essentially a social gathering, such as a cocktail party.
- A meeting with a group that includes persons who are not business associates at places such as cocktail lounges, country clubs, golf clubs, athletic clubs, or vacation resorts.
- A meeting or discussion at a nightclub, theater, or sporting event.
- Expenses generally are not considered directly related when entertainment occurs where.
What is Travel:
You can claim a deduction for travel expenses (accommodation, meals, and incidental expenses) if you travel and stay away from your home overnight in the course of performing your employment duties.
- there is no change to your regular place of work (the usual or normal place where you start and finish your work duties for your employer)
- you’re away from home for short periods of time
- you stay in short term accommodation such as a hotel.
For example, you would be travelling and staying overnight for work, where you need to travel interstate for several days to meet with clients.
Travel expenses include:
- accommodation expenses – for example, the cost of staying in a hotel, motel, serviced apartment, caravan, a property booked through a digital platform etc
- meals (food and drink) expenses
- incidental expenses which are minor, but necessary expenses associated with your work-related travel – for example, a car parking fee, bus ticket or a charge for using the phone or internet for work-related purposes at your overnight accommodation
- transport expenses to get to and from the location you are travelling to overnight for work – for example the cost of flights.
- Also receiving a travel allowance from your employer doesn’t automatically mean you can claim a deduction. If you receive a travel allowance you will also need to consider if your deductible travel allowance expenses are within the reasonable amounts. The Commissioner publishes the reasonable amounts each income year for your location and circumstances.
Travel and entertainment expenses are usually tax-deductible. However, it is vitally important that the employee keep supporting documentation such as receipts, mileage logs, etc. to claim the deduction. Some companies reimburse their employees for these expenses with funds set aside in a specific account.
Staff amenities expenses are clearly defined as the cost of tea, coffee, and biscuits etc made available to staff tea rooms for the benefit of employees.
Are staff drink tax deductible only refreshments made available at a presentation to staff on business premises like sandwiches, biscuits and tea or coffee are generally accepted. But no alcohol.
Morning and afternoon teas and light meals are generally not considered to be entertainment. However, when light meals become more elaborate than they go into the class of entertainment.
Also, when food and drink is provided during work time, during overtime or while an employee is travelling is less likely to be entertainment. More to staff amenities.
Example classifications of FBT
- Employee amenities at business premises like tea, coffee, water, vending machine foods doesn’t have FBT.
- Light meals and refreshments at business premise in connection with a meeting, training, doesn’t have FBT.
- Business meals at restaurants/similar venues outside of business premises provided to employees does have FBT.
- Business meals at restaurant/similar venues outside of business premises provided to clients & suppliers doesn’t have any FBT.
- Basic meals had by a employee on overnight business travels doesn’t have FBT.
- Gifts, vouchers, and hampers provided to employees does have FBT.