Entertainment and gifts
A Brief Overview of The Taxation Consequences of Providing Entertainment / Gifts to Employees and/or Clients
LAST UPDATED MAY 2019
Determining the correct treatment for any entertainment / gifts provided is a complex process and is dependent on a number of factors, including:
- The nature of the entertainment / gifts provided (ie. food, alcohol etc.)
- The cost of the entertainment / gifts provided
- The relationship between the recipient and the provider (ie. employee, client etc.)
- The location of where the entertainment is provided (ie. at the business premises, restaurants etc.)
The below table summarises the most common scenarios and the associated taxation consequences:
Type of expense | FBT Apply? | Deductible Expense | GST Credits Available? | Minor Benefits Exemption Available? |
|---|---|---|---|---|
Employee amenities at the business premises (tea, coffee etc) | No | Yes | Yes | N/A |
Light meals and refreshments at the business premises in connection to meetings, training, overtime (no alcohol) | No | Yes | Yes | N/A |
Social activity functions at business premises provided to employees – Christmas parties, Friday night drinks | No | No | No | N/A |
Business meals at a restaurant/similar venues provided to employees | Yes | Yes | Yes | Yes |
Business meals at restaurants/similar venues provided to clients and suppliers | No | No | No | N/A |
Basic sustenance meals consumed by employees on overnight business travels | No | Yes | Yes | N/A |
Gifts, voucher cards, hampers provided to employees | Yes | Yes | Yes | Yes |
Gifts, voucher cards, hampers provided to clients and/or suppliers (marketing) | No | Yes | Yes | N/A |
Note that the above table applies where the business uses the Actual Method of calculating their Fringe Benefits Tax (FBT) obligations.
Where the business uses the 50/50 Method or the 12 Week Register Method, the employer is not entitled to use the Minor Benefits FBT exemption.
In addition, where the Minor Benefits FBT exemption has been utilised, the business is not entitled to claim a deduction for the expenditure to the extent that it is considered to be the provision of ‘entertainment’. The business would also not be entitled to claim any GST Credits associated with entertainment expenses that were exempt from FBT under the Minor Benefits FBT exemption.
Note that the above table applies where the business uses the Actual Method of calculating their Fringe Benefits Tax (FBT) obligations.
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