The ins and outs of “entertainment” business deductions
As a tax concept, “entertainment” can be relevant not only to fringe benefits tax (FBT), but also to income tax and even goods and services tax (GST).
For a business, whether a business expense is “entertainment” will generally also determine whether the cost is deductible. If the expenditure can be shown to be directly connected with the carrying on of a business, it should be deductible.
The example of someone taking a client out to lunch can certainly be shown to be in connection with a business. However, there is still a lurking danger within the relevant sections of the tax law that says that if such an expense also represents “entertainment”, by the Australian Taxation Office (ATO) view, then that cost can be taken out of the deductibility equation. In this article, we explore these ins and outs in some detail.