Division 32—Entertainment expenses

Table of Subdivisions

Guide to Division 32

32-A No deduction for entertainment expenses

32-B Exceptions

32-C Definitions relevant to the exceptions

32-D In-house dining facilities (employer expenses table item 1.2)

32-E Anti-avoidance

32-F Special rules for companies and partnerships

Guide to Division 32

32-1 What this Division is about

You cannot deduct costs of providing entertainment. Nor can you deduct amounts for property that you use for providing entertainment. But there are exceptions.

Subdivision 32-A—No deduction for entertainment expenses

Table of sections

32-5 No deduction for entertainment expenses

32-10 Meaning of entertainment

32-15 No deduction for property used for providing entertainment

32-5 No deduction for entertainment expenses

To the extent that you incur a loss or outgoing in respect of providing *entertainment, you cannot deduct it under section 8-1. However, there are exceptions, which are set out in
Subdivision 32-B.

Note 1: Under section 8-1 you can deduct a loss or outgoing that you incur for the purpose of producing assessable income.

Note 2: If you have used your property in providing entertainment, you may not be able to deduct an amount for the property: see section 32-15.

Note 3: Section 32-75 deals with arrangements to avoid the operation of this section.

32-10 Meaning of entertainment

(1) Entertainment means:

(a) entertainment by way of food, drink or *recreation; or

(b) accommodation or travel to do with providing entertainment by way of food, drink or *recreation.

(2) You are taken to provide entertainment even if business discussions or transactions occur.

Note: These are some examples of what is entertainment:

· business lunches

· social functions.

These are some examples of what is not entertainment:

· meals on business travel overnight

· theatre attendance by a critic

· a restaurant meal of a food writer.

32-15 No deduction for property used for providing entertainment

To the extent that you use property in providing *entertainment, your use of the property is taken not to be for the *purpose of producing assessable income if section 32-5 would stop you deducting a loss or outgoing if you incurred it in the income year in providing the entertainment.

Note: Under some provisions of this Act, in order to deduct an amount for your property, you must have used the property for the purpose of producing assessable income.

Subdivision 32-B—Exceptions

Table of sections

32-20 The main exception—fringe benefits

32-25 The tables set out the other exceptions

32-30 Employer expenses

32-35 Seminar expenses

32-40 Entertainment industry expenses

32-45 Promotion and advertising expenses

32-50 Other expenses

32-20 The main exception—fringe benefits

Section 32-5 does not stop you deducting a loss or outgoing to the extent that you incur it in respect of providing *entertainment by way of *providing a *fringe benefit.

But this exception does not apply to the extent that the taxable value of the *fringe benefit is reduced under section 63A of the Fringe Benefits Tax Assessment Act 1986.

Note 1: You may be able to deduct losses or outgoings that are fringe benefits under section 51AEA, 51AEB or 51AEC of the Income Tax Assessment Act 1936. If you do, then you cannot deduct them under section 8-1 (about general deductions) and so this section is not relevant.

Note 2: There are other exceptions for a loss or outgoing you incur in providing a benefit that would be a fringe benefit if it were not an exempt benefit: see items 1.6 and 1.7 of the table in section 32-30.

32-25 The tables set out the other exceptions

Section 32-5 does not stop you deducting a loss or outgoing to the extent that you incur it in respect of providing *entertainment as described in column 2 of an item of a table in this Subdivision.

However, if column 3 of that item applies, the exception in column 2 of that item does not.

32-30 Employer expenses

 

Employer expenses

Item

Section 32-5 does not stop you deducting a loss or outgoing for ...

But the exception does not apply if ...

1.1

providing food or drink to your employees in an *in-house dining facility.

the food or drink is provided at a party, reception or other social function.

1.2

providing food or drink to individuals (other than your employees) in an *in-house dining facility.

(a) you choose (under section 32-70) not to include in your assessable income $30 for each meal you provide in the *in-house dining facility in the income year to an individual (other than your employee); or

(b) the food or drink is provided at a party, reception or other social function.

1.3

providing food or drink in a *dining facility to your employees who perform most of their duties in connection with:

(a) the dining facility; or

(b) a facility (of which the dining facility forms a part) for providing accommodation, *recreation or travel.

the food or drink is provided at a party, reception or other social function.

1.4

providing food or drink to your employee under an *industrial instrument relating to overtime.

 

1.5

providing a facility for *recreation on property you occupy, if the facility is mainly operated for your employees to use.

the facility is for:

(a) accommodation; or

(b) dining or drinking (unless it is a food or drink vending machine).

1.6

providing food or drink which would be a *fringe benefit apart from sections 54, 58, 58N, 58S and 58T of the Fringe Benefits Tax Assessment Act 1986 (disregarding section 58P of that Act).

 

1.7

providing a meal which would be a *fringe benefit apart from sections 58A, 58F, 58L, 58LA and 58M of the Fringe Benefits Tax Assessment Act 1986 (disregarding section 58P of that Act).

 

1.8

giving your employee an allowance that is included in his or her assessable income.

(a) the employee is a *relative of another employee of yours; and

(b) you give the allowance to the relative, as your employee, because:

(i) he or she provides, or facilitates providing, *entertainment to do with the other employee’s employment; and

(ii) you expect the relative to do so.

Note 1: In the case of a company, items 1.1, 1.2, 1.3, 1.5 and 1.8 cover directors of the company as if they were employees: see section 32-80.

Note 2: In the case of a company, items 1.1, 1.2, 1.3 and 1.5 cover directors, employees and property of another company that is a member of the same wholly-owned group: see section 32-85.

Note 3: Item 1.8 has a special operation for partnerships: see section 32-90.

32-35 Seminar expenses

 

Seminar expenses

Item

Section 32-5 does not stop you deducting a loss or outgoing for ...

But the exception does not apply if ...

2.1

providing food, drink, accommodation or travel to an individual (including yourself) that is reasonably incidental to the individual attending a *seminar that *goes for at least 4 hours.

(a) the seminar is a *business meeting; or

(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.

32-40 Entertainment industry expenses

 

Entertainment industry expenses

Item

Section 32-5 does not stop you deducting a loss or outgoing for ...

But the exception does not apply if ...

3.1

providing *entertainment for payment in the ordinary course of a *business that you carry on.

 

3.2

providing *entertainment in performing your duties to your employer who carries on a *business that includes providing that entertainment for payment.

 

32-45 Promotion and advertising expenses

 

Promotion and advertising expenses

Item

Section 32-5 does not stop you deducting a loss or outgoing for ...

But the exception does not apply if ...

4.1

providing *entertainment if:

(a) you provide it to an individual under a contract to supply him or her with goods or services in the ordinary course of your *business; and

(b) you incur the loss or outgoing to promote or advertise to the public your business or its goods or services.

 

4.2

providing or exhibiting your *business’s goods or services if you incur the loss or outgoing to promote or advertise those goods or services to the public.

 

4.3

providing *entertainment to promote or advertise to the public a *business or its goods or services.

some people have a greater opportunity to get the benefits of the entertainment than ordinary members of the public have.

32-50 Other expenses

 

Other expenses

Item

Section 32-5 does not stop you deducting a loss or outgoing for ...

But the exception does not apply if ...

5.1

buying food or drink to do with overtime that you work, if you receive an allowance under an *industrial instrument to buy the food or drink.

 

5.2

providing *entertainment free to members of the public who are sick, disabled, poor or otherwise disadvantaged.

 

Subdivision 32-C—Definitions relevant to the exceptions

Table of sections

32-55 In-house dining facility (employer expenses table items 1.1 and 1.2)

32-60 Dining facility (employer expenses table item 1.3)

32-65 Seminars (seminar expenses table item 2.1)

32-55 In-house dining facility (employer expenses table items 1.1
and 1.2)

An in-house dining facility is a canteen, dining room or similar facility that:

(a) is on property you occupy; and

(b) is operated mainly for providing food and drink to your employees; and

(c) is not open to the public.

Note 1: In the case of a company, this definition also covers directors of the company as if they were employees: see section 32-80.

Note 2: In the case of a company, this definition also covers directors, employees and property of another company that is a member of the same wholly-owned group: see section 32-85.

32-60 Dining facility (employer expenses table item 1.3)

A dining facility is:

(a) a canteen, dining room or similar facility; or

(b) a cafe, restaurant or similar facility;

that is on property you occupy.

Note: In the case of a company, this definition also covers property of another company that is a member of the same wholly-owned group: see section 32-85.

32-65 Seminars (seminar expenses table item 2.1)

(1) Seminar includes a conference, convention, lecture, meeting (including a meeting for the presentation of awards), speech, "question and answer session", training session or educational course.

(2) In working out whether a *seminar goes for at least 4 hours the following are taken not to affect the seminar’s continuity, nor to form part of it:

(a) any part of the seminar that occurs during a meal;

(b) any break during the seminar for the purpose of a meal, rest or *recreation.

(3) A *seminar is a business meeting if its main purpose is for individuals who are (or will be) associated with the carrying on of a particular *business to give or receive information, or discuss matters, relating to the business.

However, the *seminar is not a business meeting if it:

(a) is organised by (or on behalf of) an employer solely for either or both of these purposes:

(i) training the employer and the employer’s employees (or just those employees) in matters relevant to the employer’s *business (or prospective *business);

(ii) enabling the employer and the employer’s employees (or just those employees) to discuss general policy issues relevant to the internal management of the employer’s *business; and

(b) is conducted on property that is occupied by a person (other than the employer) whose *business includes organising seminars or making property available for conducting seminars.

Note 1: In the case of a company, subsection (3) covers directors of the company as if they were employees: see section 32-80.

Note 2: In the case of a company, paragraph (3)(b) also covers property of another company that is a member of the same wholly-owned group: see section 32-85.

Note 3: Subsection (3) has a special operation for partnerships: see section 32-90.

Subdivision 32-D—In-house dining facilities (employer expenses table item 1.2)

Table of sections

32-70 $30 is assessable for each meal provided to non-employee in an in-house dining facility

32-70 $30 is assessable for each meal provided to non-employee in an in-house dining facility

(1) Your assessable income includes $30 for a meal you provide in an *in-house dining facility in the income year to an individual other than your employee, but only if:

(a) you incur a loss or outgoing in respect of providing the meal; and

(b) because of item 1.2 of the table in section 32-30,
section 32-5 does not stop you deducting the loss or outgoing under section 8-1 (which deals with general deductions); and

(c) the loss or outgoing is one that you can deduct under
section 8-1 for the income year or some other income year.

(2) However, you can choose not to include in your assessable income $30 for each meal you provide in the *in-house dining facility in the income year to an individual other than your employee.

Note: If you do choose, you cannot rely on item 1.2 of the table in
section 32-30 as a basis for deducting a loss or outgoing you incur in respect of providing a meal.

(3) You must choose by the day you lodge your *income tax return for the income year, or within a further time allowed by the Commissioner.

Subdivision 32-E—Anti-avoidance

Table of sections

32-75 Commissioner may treat you as having incurred entertainment expense

32-75 Commissioner may treat you as having incurred entertainment expense

If:

(a) you incur a loss or outgoing under an *arrangement; and

(b) someone provides *entertainment under the arrangement to you or someone else; and

(c) section 32-5 would have stopped you deducting the loss or outgoing under section 8-1 (which deals with general deductions) if you had incurred it in respect of providing that entertainment;

this Division applies to you as if you had incurred the loss or outgoing in providing that entertainment, to the extent (if any) that the Commissioner thinks reasonable.

Note: This means that section 32-5 will prevent you from deducting the loss or outgoing under section 8-1 unless an exception applies.

Example: A company pays $1,000 to sponsor a football game. Under the same arrangement, the company is given a viewing box at the game. To the extent the Commissioner thinks reasonable, he or she can treat the company as having incurred the $1,000 in providing entertainment.

Subdivision 32-F—Special rules for companies and partnerships

Table of sections

32-80 Company directors

32-85 Directors, employees and property of wholly-owned group company

32-90 Partnerships

32-80 Company directors

In the case of a company, these provisions cover directors of the company as if they were the company’s employees:

· item 1.1 (exception for *in-house dining facilities) of the table in section 32-30;

· item 1.2 (exception for *in-house dining facilities) of the table in section 32-30;

· item 1.3 (exception for *dining facilities) of the table in section 32-30;

· item 1.5 (exception for recreational facilities) of the table in section 32-30;

· item 1.8 (exception for providing your employee with an allowance) of the table in section 32-30;

· section 32-55 (which defines in-house dining facility);

· subsection 32-65(3) (which defines business meeting).

32-85 Directors, employees and property of wholly-owned group company

Employees and directors of group company

(1) In the case of a company, these provisions cover directors and employees of another company that is a member of the same *wholly-owned group as if they were the company’s own directors and employees:

· item 1.1 (exception for *in-house dining facilities) of the table in section 32-30;

· item 1.2 (exception for *in-house dining facilities) of the table in section 32-30;

· item 1.3 (exception for *dining facilities) of the table in section 32-30;

· item 1.5 (exception for recreational facilities) of the table in section 32-30;

· section 32-55 (which defines in-house dining facility);

· subsection 32-60(1) (which defines dining facility);

· paragraph 32-65(3)(b).

Property occupied by group company

(2) Those provisions also cover property occupied by that other company as if the company occupied that property.

32-90 Partnerships

In the case of a partnership:

• item 1.8 (exception for providing employee with an allowance) of the table in section 32-30; and

• subsection 32-65(3) (which defines business meeting);

apply to a partner in the same way as they apply to an employee of the partnership, but only for the purposes of calculating, in accordance with section 90 of the Income Tax Assessment Act 1936, the partnership’s net income or partnership loss.

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