In general, no!
You can’t use expenses from entertainment as an income tax deduction. There are some exceptions, mostly around food expenses for meal allowances and incidentals relating to business travel and overtime etc., but otherwise entertainment, even specifically for business purposes, is not deductible unless you decide to classify the expense as a fringe benefit.
‘Entertainment’ according to the ATO, is the provision of entertainment with food, drink or recreation. There isn’t an ‘Entertainment Fringe Benefit’ category, however ‘entertainment’ may fall into the following fringe benefit categories:
- An expense payment fringe benefit – for example, the cost of theatre tickets purchased by an employee and reimbursed by the employer
- A property fringe benefit – for example, providing food and drink
- A residual fringe benefit – for example, providing accommodation or transport in connection with entertainment
If you seek to get a tax deduction for your Christmas party expense you may then be subject to the 46.5% Fringe Benefit Tax on the expense amount.
Include the extra costs associated with your accounting fees, to deal with the Fringe Benefit Tax, and the benefit of including the Christmas Party expenses as a tax deduction is likely to be null and void and hardly worth the effort.
Anyway, enjoy your Christmas parties, just remember it won’t be worth much as a tax deduction and make sure you keep enough money in the kitty to cover your post-Christmas cash flow needs.
All the best for Chrissy!
For more information on fringe benefit tax visit the ATO website.
If you are uncertain on this subject, and would like advice and guidance on this matter, please call Mark and the team at Trak on 07 5512 6106.