Common accounting questions concerning entertainment and also auto expenses

[Kristina Grinder]

Entertainment as well as automobile spendings– these are two typical company expenses. In the ever-increasing mobile business life, client and job meetings are often held at cafés and also restaurants while drinking and eating. These expenses need to be treated as entertainment costs in your business accounts, and also, for tax purposes, you can not claim back the GST paid.
The spendings are not tax deductible for the client part of the price. Just a few of the complete expense can be taken as a tax deduction, as well as only if your business is signed up for Fringe Benefits Tax (FBT).

It gets complicated when, as an example, you have a Golf Day for workers in your organization, their companions as well as the firm customers. A Golf Day is a gathering and is regarded entertainment. If the price for the day for the workers and also their partners is less than $300 each, then these prices are considered entertainment, but also for tax reasons, the firm can not take the GST paid, can not claim the spending as a tax reduction, as well as no Fringe Benefits Tax is payable.

In relation to the company customers’ expenses, the expenditure is identified as entertainment in your company accounts, yet you can not assert the GST paid or declare the spending as a tax deduction.

So are there any tax breaks?
Yes– if you give food and drink on your company facilities and also it is enabling you, your employees and customers to complete the operating day comfortably, and it is eaten on your company premises, then this is certainly not entertainment. It just turns into entertainment when it is a get-together (if you and the employees are “delighting in” yourselves).

What expenditures can I declare for my car?
Does your company own the auto? That is, is the certification and also insurance policy of the auto in the name of your company? If so, then the company can classify the following as organization expenditures: vehicle certification and insurances, fuel and servicing expenses and also car cleans to keep it looking pretty.

The price of the vehicle spendings, however, needs a little bit more work. If you intend to increase the amount of the car expenditures you can take for your business, then you need to set up a business-use percentage by keeping a log over a constant twelve-week duration to substantiate the organization kilometres driven by automobile. The log is excellent for 5 years, and after that you will need to monitor it again. It is this percentage that you can take of all the auto maintenance expenses, including devaluation as well as funding the price of the automobile. (Note: travel from your house to your work environment is not business traveling.).

You should compensate your business for the portion of the vehicle expenditures that is for your exclusive usage, or your firm might be subject to Fringe Benefits Tax (FBT). Also, your organization can just assert the business-use portion of the GST paid.

So, to maintain your accountant happy and also the tax man at bay, stay with the above tips.

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