Expenditure incurred in respect of providing entertainment will not be allowed as a deduction for expenses incurred in gaining or producing assessable income under section 8-1.
It does provide for some exceptions to that rule, but if you want to claim entertainment expenses incurred in gaining your assessable income, you may well be disappointed.
Before we look at the exceptions, let's just clarify what entertainment means.
Accommodation or travel to do with providing food, drink or recreation
Section 32-10 (2) says you are taken to provide entertainment even if business discussions or transactions occur.
Section
32-15 extends the exclusion from deduction under section 8-1 to the use of property in providing entertainment. Such use of property will be deemed NOT to be for the purpose of producing assessable income.
32-5 stops you deducting a loss or outgoing to the extent that you incur it in respect of providing *entertainment, but it does provide for some circumstances in which you will be allowed the deduction. The first of these is authorised by section 32-20, and allows a deduction for entertainment which comes within the definition of a providing a fringe benefit.
So if you are liable to fringe benefits tax on the entertainment expenses, you can seek to deduct them under section
32-30 sets out 8 situations in which you can claim a deduction for food, drink (and in one instance, recreation) to your employees.
Please note we will use the term staff cafeteria to save us repeating the phrase 'canteen, dining room, cafe, restaurant or similar facility. But you should look up the terms dining facility in section
32-60 and in-house dining facility in section 32-55 before proceeding.
Answer this question....
Can the cost of putting on a staff party in the cafeteria be claimed under section 8-1.
You will have to include $30 in your assessable income for each such meal provided. If you do not wish to include the $30 per meal in your assessable income, you can decline to claim the costs incurred in providing the meal as a deduction.
Answer this question....
Can a deduction be claimed for the cost of providing meals in the staff cafeteria (in-house dining facility if you wish to be pedantic) to persons who are NOT employees.
Yes
No
The answer is YES but remember the catch. Refer section 32-30 (1.2). You have to include $30 in your assessable income for each meal provided for a non employee. So unless you will be claiming more than $30 or more, use the escape clause provided by section 32-70
What about the food the cafeteria staff eats? - Refer section
You can claim their food, drink at any dining facility (not just in-house) where they perform most of their duties, or even at a facility providing accommodation, recreation or travel if the dining facility forms a part of it.
Section
30-30 (1.4) - food or drink provided to employees working overtime if you are required to do so by an industrial instrument (award) can be deducted.
Section
30-30 (1.5) - the cost of providing the staff amenities room can be deducted but refer to the table to see the exception.
Section
30-30 (1.6 & 1.7) - refer to food and drink which would be fringe benefits but for exempting provisions
Section
30-30 (1.8) - if the cost of entertainment is provided as an allowance which will be included in an employee's assessable income, then you can claim the deduction. Read section 33-20 table at 1.8 for the exceptions relating to allowances paid to relatives (such as a hostess allowance paid to the wife of an employee who entertains in the course of his duties)
No entertainment deduction UNLESS you are training the workers - section 32-35
You can claim the cost of food, drink, accommodation or travel that is reasonably incidental to the attendance by an individual at a seminar that goes for at least 4 hours
So just get the boss to take you all out to lunch and tell him to claim it as a seminar?
(a) The seminar is an *in-house meeting; or - that is defined in section 32-65 as a meeting with the purpose of allowing individuals associated with the business to give or receive information or discuss matters relating to the business. However, if the meeting is organised for the purpose of training, or enabling discussion of general policy issues relevant to the internal management of the business at a place such as a convention centre run as a business, it will be a seminar, and not an in-house meeting.
(b) The *seminar's main purpose is to promote or advertise a *business (or prospective *business) or its goods or services; or
(c) The *seminar's main purpose is to provide *entertainment at, or in connection with, the seminar.
This would not amount to a seminar
No entertainment deduction UNLESS you run an entertainment business - section 32-40
Obviously, the Assessment Act would not seek to disallow expenses incurred in the provision of food, drink and recreation to taxpayers who derive their income from the provision of food, drink and recreation.
Section
32-5 does not stop you deducting a loss or outgoing for...
The employer providing *entertainment for payment in the ordinary course of a *business that you carry on - refer section 32-40 (3.1).
The employee providing *entertainment in performing your duties to your employer who carries on a *business that includes providing that entertainment for payment.- refer section 32-40(3.2)
No entertainment deduction UNLESS you are in the promotions business - section 32-45
Answer this question....
Can a deduction be claimed for incentives such as free holidays offered by a business to lure customers to purchase it's products eg a free holiday given to the purchaser of a new car.
Can a deduction be claimed for free goods or services offered by a business which provides entertainment as part of a promotion of their products eg free meals offered by a restaurant, free passes by a cinema, wine provided for a tasting by a winery in a self promotion exercise
Yes
No
Refer Section 32-45 4.2 - note that the goods or services provided must those provided by the business - free drinks at a fashion show would not qualify unless they were could be claimed under the exception at section
Would a deduction be allowed for the goods or services are provided at a promotion which is open to the general public, and not just ... clients, customers, suppliers, employees, other associates, journalists, dignitaries, any other special class of person?
Yes
No
Refer section
32-45 4 A promotion at a shopping mall in which refreshments were provided free of charge would qualify if it was open to any one who wished to attend. The taxpayer would not necessarily have to be involved in the entertainment industry in order to claim the deduction for expenses incurred.
No entertainment deduction UNLESS you are spending your overtime meal allowance section 32-50
Section
32-50 5.1 deals with an employee spending his over time meal allowance to buy food and drink. Where the taxpayer pays a meal allowance under an industrial instrument, rather than providing a meal, the expenditure of the allowance by the employee on a meal will be eligible for deduction under section 8-1
No entertainment deduction UNLESS you are entertaining the importunate - section 32-50
Section
32-50 5.2 applies where the taxpayer provides gratuitous entertainment to the
sick,
disabled,
poor or
otherwise disadvantaged.
Such expenses might still qualify for deduction under section 8-1
For example - a company sponsored Christmas party put on in a hospital
32-75 allows the Commissioner to treat expenditure incurred under arrangement (the general idea of which is transform entertainment expenses into some other form of expenditure) as having been incurred as entertainment expense
Answer this question....
A company pays $1,000 to sponsor a football game.
Under the same arrangement, the company is given a viewing box at one of the football matches.
Can the Commissioner treat this $1000 as an expense for the provision of recreation and treat the company as having incurred the $1,000 in providing entertainment.
No Virginia! You can not deduct an expense in respect of providing entertainment
(a) The seminar is an *in-house meeting; or - that is defined in section 
