Company Christmas parties are over, but the work of employers doesn’t end. With a long list of entertainment expenses incurred during the Christmas season, businesses should start the year right by looking at the Fringe benefits tax (FBT), Goods and Services Tax (GST) and Income Tax Rules surrounding entertainment and gifts they have provided.
Entertainment expenses may include food, drink, recreation, accommodation, or travel in connection with such entertainment. For example, business lunches and staff social functions such as company parties can be counted as providing entertainment. In classifying an expense as entertainment, there are certain factors that must be considered. These include the reason for providing the entertainment, when and where the entertainment was provided and the type of entertainment.
The big question is “Does the provision of entertainment give rise to FBT?”. Providing entertainment may give rise to various types of fringe benefits. Once the cost has been concluded to be an entertainment, it is important for businesses to establish whether an exemption to FBT applies.
When it comes to entertainment expenses, there is more to FBT that businesses need to consider. Businesses should also know about whether or not they can claim GST credits or income tax deduction for the cost of providing entertainment.
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