In the intricateand often crowded world of business expenses, entertainment costs often stand out due to their unique rules and implications for claiming input tax credits (GST). Let's unravel the mystery and ensure you make the most of your claims. The fact -is that while you may be able to justify an expenditure as business-related, this does not necessarily mean that it is deductible or that you are able to claim GST credits under the ATO rules.
Identifying COMMON Entertainment Expenses
Company-Sponsored Social Functions:
While celebrating staff achievements or hosting a Christmas party may be considered essential for team morale, it's crucial to recognise that expenses incurred in such events may be classified as entertainment. The ATO considers these costs, including venue hire, catering, and entertainment, as subject to specific rules. Another implication to consider is whether the provision of the christmas party or other function triggers a need to lodge a Fringe Benefit return and make an associated Fringe Benefit Tax (FBT) payment. The rules here are tricky and can differ depending on the amount of the entertainment benefit and the relationship to the business of each attendee. Even if FBT doesn’t apply, this does not mean that the expense is deductible or that GST credits are claimable.
Coffee Shop Meetings:
Surprisingly, even seemingly innocuous expenses, like purchasing coffees or conducting meetings at a coffee shop, can fall under the entertainment category. Understanding how to treat these costs is vital for accurate bookkeeping. Further, depending on the why, what, when and where of the food and drink with aid in determining whether the cost is considered entertainment or not, both for deductibility and the triggering of FBT and related GST treatment.
Input Tax Credit (GST) Rules
Claiming GST on Entertainment Expenses:
GST can be claimed on business expenses, but when it comes to entertainment, there are restrictions. Generally, you cannot claim GST credits for the GST included in the cost of providing entertainment. Exceptions exist for certain expenses associated with providing entertainment to employees, but navigating these exceptions requires careful consideration.
Be Sure to Engage Expert Advice and Support
Understanding the nuances of entertainment expenses can be challenging, and that's where we come in.
Book a Free Consultation:
For personalied advice tailored to your business, book a free consultation with a Registered BAS Agent. We'll guide you through the specifics of your entertainment expenses, ensuring compliance and optimal claiming. Should you wish to engage us for our done-for-you bookkeeping packages, we will also liaise with your accountant to ensure accuracy and best practice surrounding tax planning.
DIY Support Package:
If you manage your own books and want ongoing support, consider one of our Monthy Xero Bookkeeping Support Packages. Gain access to expert assistance whenever you need it, ensuring your Xero records stay accurate and up-to-date. Our support packages come in a range of levels from Bronze to Platinum, depending on your required level of support.
A Seamless Journey to Compliance
By mastering the rules surrounding entertainment expenses, you pave the way for a seamless journey to compliance. Remember, we're here to assist you every step of the way.
The information contained in this blog is general in nature only and not tailored to any specific industry or situation. You should obtain the advice of a professional and refer to the ATO’s guide when classifying entertainment expenses.
The content generated in this blog was produced with the assistance of OpenAI's GPT-3.5 mode