If you’re a business in Queensland and you employ workers, you must insure them against work-related injury or illness with an accident insurance policy.
With Christmas almost upon us we often get lots of questions around Entertainment and Gift related expenses and the tax deductibility of Christmas parties. To assist in dispelling some of the myths on what you can and can’t claim we have provided below a brief overview.
Entertainment Related Expenses
One area that causes a lot of confusion for small businesses is whether the cost of meals, drinks and coffees for both staff and potential and existing clients can be claimed as a tax deduction.
Expenses such as these are classified as ‘Entertainment’ and are generally not tax deductible. ‘Entertainment’ expenses include business lunches and drinks, cocktail parties, sporting events, etc. Whether they are deductible must be reviewed on an individual basis.
Factors influencing the deduction include:
- Why is the food/drink provided? – is it for refreshment or social?
- What food/drink is being provided? – is it a light meal or more elaborate meal? Is alcohol being provided?
- When is the food/drink being provided? – is it during work time, overtime or after hours?
Where is the food/drink provided? – is it on business premises or off site at a function/restaurant?
The table below summarises some of the common scenarios and how each is treated for tax purposes:
As an employer, it is important to remember the taxation rules around Fringe Benefits Tax and the ability (or not) to claim a tax deduction and GST on certain gift items.
As an employer, you may want to give gifts to your employees as a way of saying thank you. Different types of gifts have differing taxation treatment, please refer below for a summary:
- Gifting cash to employees as their Christmas present can be tax deductible, as long as it is processed through payroll as a bonus with applicable withholding tax and superannuation paid. This will not attract FBT for you as an employer, and the employees will pay income tax on the amount paid.
- Entertainment gifts such as tickets to an event are not tax deductable, and you will not be able to claim the GST on this kind of gift.
- Non entertainment gifts are tax deductible, and you will be able to claim GST on these items. Non entertainment gifts under $300 are the most favourable for businesses looking to avoid paying FBT and wanting to claim a tax deduction.
If you need our assistance or have questions around Entertainment and gifts please contact the office on 07 5451 1118