With the holiday period quickly approaching, we’re all spending a lot of time out of the office at end of year functions and lunches. So, we thought it is a great time to provide everyone with a refresh on what you can claim in terms of entertainment provided for your team, clients or any other business contacts.
50% Deductible Entertainment
The following is a list of the four types of entertainment where deductibility is limited to 50%:
The cost of corporate boxes, corporate marquees or tents.
The cost of accommodation in a holiday home or time-share apartment.
The cost of hiring a pleasure craft.
The cost of food and beverages enjoyed in any of the three locations listed above, or food and beverages enjoyed on the business premises for a social event.
The cost of food and beverages provided off your business premises (except morning and afternoon teas).
Did you know that some Entertainment Expenses are Fully Deductible?
The following are a list of the entertainment expenses that are fully deductible:
Meals while travelling on business - The cost of a meal while travelling on business is fully deductible as long as there are no business contacts present.
Conferences - The cost of light refreshments at a conference or business course, which lasts at least four hours.
Meals - The cost of a light meal provided to employees when provided during the course of the employees’ normal duties.
Morning and afternoon teas.
Promotions open to the public and trade displays - Entertainment provided by a business as part of a function open to the public, or at trade displays to advertise the business.
Off-shore entertainment.
Monetary sponsorship - The cost of sponsoring entertainment is fully deductible where the sponsorship is principally for promotion or advertising to the public.
Entertainment for charitable purposes (eg Business donates food to the City Mission Christmas Appeal).
Licensed premises operators - Costs incurred in providing a special offer.
To ensure that you get the maximum benefit from your entertainment expenditure, it is important to bear these rules in mind when considering entertainment expenditure and when working on your accounts. As a general rule of thumb, we encourage clients to put all 50% deductible items to their entertainment code. Those items that are 100% deductible are generally put to other codes such as staff training and welfare, travel, sponsorship or donations.
Enjoy the lead in to the holiday period and make sure you give consideration to how any entertainment expenditure should be recorded in your accounts once you are back at work in January.
If you have any questions about the entertainment rules and how an item should be treated, get in touch with the team at Thrive CA.