As an employer, you might find yourself taking your team out for lunch from time to time, participating in team leisure activities, or purchasing a gift for an employee. Did you know that some entertainment is tax deductible? In this article, we look at what we mean by entertainment and whether or not it’s tax deductible.

What is meant by ‘providing entertainment’?

A business providing entertainment might include:

  • Providing food, drink or recreational activities
  • Accommodation or travel that is connected with such entertainment, or
  • Paying or re-imbursing a staff member for expenses incurred in purchasing something associated with the above points.

Some example of ‘providing entertainment’ includes:

  • Staff social functions (Christmas parties, birthday parties, farewell functions, anniversary dinners and celebrations for achieving sales targets).
  • Reward and recognition functions.
  • Client business lunches
  • Product launch functions
  • Sport entertainment (golf days, gym memberships, sports club memberships)

What you need to know:

If you find yourself providing these events for your staff, it’s important to know whether the events will be classified as ‘entertainment’ and require you to pay Fringe Benefit Tax (FBT). Below is a list of some common scenarios and an indication on whether or not they’re tax deductible.