There are two provisions of entertainment:
- Entertainment by way of food, drink and recreation, and
- Accommodation or travel to facilitate entertainment.
Examples of the provision of entertainment are:
- Business lunches and drinks and staff social functions
- Sporting, theatrical and holidays provided to employees and clients
- Accommodation and travel which is connected with, or facilitating the entertainment of clients and employees
Meal Entertainment provided to an employee is deductible and subject to FBT, while entertainment provided to clients is not subject to FBT but is a non-deductible expense. Meal entertainment expenditure can be allocatedbetween clients and employees on:
(a) Per head basis (actual method); or
(b) 50/50 split (50/50 method); or
(c) Business percentage calculated by reference to a 12 week register (Register method).
An election must be made for the 50/50 method and 12 week register method to apply.
Recreational entertainment provided to employees includes the hiring or leasing of corporate boxes, boats or planes and other premises used for providing entertainment. The taxable value of recreational entertainment will depend on whether the benefit is an expense payment, property or residual fringe benefit.