When is entertainment tax deductible

Find out more. An entertainment expense where the benefits are enjoyed or received by employees may be subject to fringe benefit tax FBT. These are summarised briefly below. Read our Entertainment expenses guide - IR to find out more about entertainment expenses. This includes entertainment that is away from work or out of usual working hours, so it has a 'significant private element'.

Examples of this include rewards for good performance, such as a restaurant gift voucher or weekend away. This column aims to eliminate confusion. However, there are some unanswered questions: Do bars that serve food count as restaurants? Presumably they do. What about airport lounges? What about food trucks? Nobody knows. We await IRS guidance. But after the TCJA change, you can no longer deduct any part of the cost of taking clients out for a round of golf, to the ballgame, or for a ride on the Ferris wheel.

In , the IRS finally issued eagerly-awaited regulations. So, the regulations will need to be updated. Another scenario where food and drink would never be considered entertainment by ATO standards is where expenditure is incurred by an employee who is travelling away from home.

In this situation also, there is less of a requirement that the items consumed be merely functional. So if a business hosts a product launch, for example, and serves up a spread of various food and drinks for the guests, including alcohol, the costs of this entertainment will be deductible. The food and drink are relevant and incidental to the promotional event of the business.

Clearly, the time frame is important to allow for an unchallengeable deduction claim. Naturally, many taxpayers are wary of not crossing a line when it comes to making tax deduction claims, as are many tax practitioners. The ATO has power to dole out various penalties and fines, which can be a disincentive in situations where the outcome is not certain. However, it is equally the case that taxpayers might be missing out on some very legitimate tax deductions by merely not exploring their books and taking too conservative a view that certain elements of their expenditure is off the table.

Meals provided at employer-operated eating facilities which are treated as a de minimis fringe under Sec. Entertainment Expenses Anything considered to constitute entertainment, amusement, or recreation is nondeductible, including the cost of facilities used in connection with these activities. This is unchanged from tax reform. Fully deductible Fully deductible Business meals e. Nondeductible Nondeductible De minimis items provided to employees at the office e.

Fully deductible Fully deductible It is important to review how your meals and entertainment expenses are categorized. Fully deductible.