Clients, Gifts and the Footy

Mia: Welcome to the podcast, our newsletter made easy. Please note, this podcast features AI-generated voices for your hosts, Mia Taylor Leo: and Leo Baker, bringing you expert insights from the team at Aevum Accounting. Each week, we're here to help you confidently navigate the ins and outs of Australian tax, whether it's for your individual finances or the complexities of your business. Mia: We'll cut through the jargon to give you strategies for compliance, smart planning, and that ultimate peace of mind. Leo: So, if you're looking to understand your obligations, maximise your financial position, or simply gain clarity on your money matters, you're in the right place. Let's get started with our review of the week! Mia: This one comes from Elly. She says the team are not just knowledgeable and professional, but that they genuinely care, and that she and her husband always feel looked after. She mentioned Troy especially, and said they wouldn't trust anyone else with their accounting. Leo: Thank you, Elly. And being looked after is a good way into today, because this is the half of the topic where people are most likely to get it wrong without ever knowing. Mia: Last week was our own team. Leo: Last week was our own team and the Christmas party. This week it's everyone who doesn't work for you. Clients, referral partners, suppliers, and what happens when you take someone to the footy. Harvey, welcome back. Harvey: Thanks. And can I do the one-line recap first, because everything today hangs off it. Entertainment is not deductible and you can't claim the GST, unless you pay fringe benefits tax on it. Last week that rule mostly worked in your favour. This week it mostly doesn't. Mia: Why the difference? Harvey: Because fringe benefits tax only applies to your employees and their families. Your clients aren't employees. So there's no fringe benefits tax on them, which sounds like good news, and it means you get no deduction and no GST credit either. Mia: Here's the one I'd argue. If I'm talking business the whole time, surely that changes it. Harvey: It changes nothing, and the law says so on its face. You are taken to provide entertainment even if business discussions or transactions occur. Leo: That's the actual wording? Harvey: That's the wording. And the tax office has an example on its own site of a business development manager who goes to lunches, cocktail parties and dinners where he meets potential new clients. He talks work the whole time and still can't claim what he spends. And the same page says a work function isn't deductible even if everyone there is a work colleague, even if you discuss work, even if attendance is compulsory. Leo: Let's move to clients. I take a client to lunch. Harvey: You split the bill in your head, by head. The client's share gets nothing. No fringe benefits tax, because they're not your employee, but no deduction and no GST credit either. Mia: And our own share? Harvey: That depends on how you're set up. If you're an employee of the business, and that includes a director of your own company, your meal is a fringe benefit. So either you pay tax on it and claim it, or it's a minor benefit and exempt, and you're back to no deduction. If you're a sole trader or in a partnership, you're not an employee, so there's no fringe benefits tax on your meal. It's just not deductible. Leo: What about referral partners? A lot of our listeners are in networking groups. Harvey: Same as a client. A referral partner isn't your employee, so no fringe benefits tax, and no deduction and no GST credit. Same for suppliers, same for a business associate, same for a breakfast with someone who sends you work. Mia: Even though it's entirely business. Harvey: Even though. That's the rule we read out earlier, doing its job. One caveat, same as last week: all of this assumes you value meal entertainment on actual cost. Under the fifty-fifty method, half of everything you spend on meal entertainment, clients included, is taxed and half is deductible. That's next week. Leo: Is there ever a client meal you can deduct? Harvey: A couple, and they're narrow. Coffee and sandwiches at a working meeting in your own office aren't entertainment at all, so they're deductible. And if you're away from home on business, and the client you're eating with is also away on business, the tax office accepts the meals aren't entertainment at all, and the employer deducts the lot, including the client's meal. Mia: Both of you travelling. Harvey: Both. If you're at home and they've flown in, that doesn't do it. And if there's a floor show with the dinner, it's entertainment again regardless. Leo: Now, gifts. I suspect this is where the good news is. Harvey: This is the best news in the episode, and most business owners don't know it. A gift to a client is deductible. Mia: Even though lunch with the same client isn't? Harvey: Even though. And it isn't a technical argument, it's a binding public ruling on exactly that question. Their example is a woman running a renovation business who sends a client a bottle of champagne. She gets the deduction, because it was made for the purpose of producing future business. Leo: What's the catch? Harvey: Two. The first is that it has to be genuinely for the business. The same ruling has a man who sells garden statues giving his brother a bottle of champagne. His brother had bought a statue, so he was technically a client, but the gift was for family reasons, so it's private and he gets nothing. The second is the big one. It only works if the gift isn't entertainment. Mia: How do I tell the difference? Harvey: Ask whether the gift is itself entertainment: hospitality, or recreation like a show, a game or an outing. A bottle of wine, a hamper, flowers, a case of beer. Those are presents. You hand them over, and the tax office doesn't treat them as entertainment. Leo: And the other side? Harvey: Theatre tickets, a round of golf, a hired entertainer. That's recreation, which is entertainment, even if they use the tickets next month. On a client you get nothing. A restaurant voucher is in the same camp in our view, though the tax office hasn't said so directly. Mia: So the bottle is fine and the ticket isn't. Harvey: That's the line. And here's the one that makes people laugh. At the same Christmas party, the bottle of wine you hand a client at the door is deductible, if it's a genuine business gift, and the glass of wine you pour them inside is not. Leo: Is that real? Harvey: It's real. Same wine, same invoice, opposite answers, because one is a thing you're giving them and the other is part of the entertainment. Mia: What about gifts to our own staff? Harvey: Same split, with a twist in your favour. A gift to an employee that isn't entertainment, like a hamper or a bottle of wine, is usually exempt as a minor benefit if it's under three hundred dollars and a one-off, like a Christmas present. And you still get the deduction, and for most gifts the GST credit, because it was never entertainment. Leo: And an entertainment gift to staff? Harvey: Exempt as well if it's under three hundred and a one-off, but you lose the deduction and the GST, because now the exemption is sitting on entertainment. Movie tickets and wine cost the same at the till and different amounts after tax. Mia: What about gift cards? Harvey: Gift cards need care, and I'd rather flag the trap than give you a rule that isn't there. Whether a card is entertainment probably depends on what it can be spent on. A cinema-only card is very likely entertainment, because movie tickets are. A restaurant card probably is too. Leo: And a general one? Harvey: A judgement call, and I'll be straight with you. The tax office has worked through store vouchers given as Christmas presents and rewards, and it applies the minor benefit test to them, but it hasn't said in so many words whether a card you can spend anywhere is entertainment. So don't assume a card is safe just because you could buy a toaster with it. Mia: Are there other traps with cards? Harvey: Two, and they're both quiet ones. The first is timing. If you buy the card at about the time you hand it over, it's valued at what you paid for it. If you bought it months ago in a sale, it's valued at what your employee would have to pay for it on the day you give it, which is usually the amount on the card. Leo: So the sale price doesn't help you. Harvey: It doesn't. People buy fifty cards at a discount in June, hand them out in December, and find they're testing a higher number against the three hundred dollar threshold than the one on their receipt. Mia: And the second trap? Harvey: The GST. On most gift cards, the ones you can spend on a range of things up to the amount on the card, buying the card isn't a taxable supply, so there's no GST in the price for you to claim. GST only comes in when the card is spent, and it's the shop that pays it. Your employee spending it on themselves can't claim anything, so nobody gets that GST back. So you can have a gift that's deductible and still get no GST credit. Leo: Let's do the footy, it's finals season. Harvey: Tickets first. Give tickets to a client and you get nothing. No fringe benefits tax, no deduction, no GST credit. Mia: And to staff? Harvey: A fringe benefit. Under three hundred dollars a ticket and not something you're doing constantly, it's likely a minor benefit and exempt, and then you lose the deduction. Three hundred or more, or handing them out all season, you're paying tax, and then you get the deduction back. Mia: What about a corporate box? Harvey: Treated differently from tickets, and this is the distinction almost nobody gets right. Hiring a box, a marquee, a function room to the exclusion of everyone else, or a golf course for a corporate day. That's facility hire, with its own set of rules. For clients the answer is the same either way, no deduction. The difference is for staff, where you can value hired facilities with a fifty-fifty split of the whole cost. Leo: And a seat at the same match isn't? Harvey: Isn't. Neither is a table in a restaurant, or green fees, or a seat on a plane. Same game, same afternoon, different rules depending on whether you hired the room or bought the chair. Mia: I've heard you can claim part of a box as advertising. Harvey: You can, if there's signage. The tax office generally accepts five per cent of the cost as advertising and ninety-five per cent as entertainment, and you can argue for more if you can prove it. But read the question they answered. It's about a corporate box with associated advertising signs. No signage, no five per cent. Leo: What about sponsorship generally? A lot of our listeners sponsor a local club. Harvey: Sponsorship that's genuinely advertising is deductible, and that's a good outcome. But be careful, because there's an anti-avoidance provision that points the other way, and the example is written into the law itself. Mia: What's the example? Harvey: A company pays one thousand dollars to sponsor a football game, and under the same arrangement it gets a viewing box. The law lets the Commissioner treat as much of that thousand as he thinks reasonable as spent on entertainment. Leo: So the box swallows the sponsorship. Harvey: It can take a reasonable slice of it, and sometimes a big one. Which is why, if your sponsorship package bundles signage with tickets and hospitality, you itemise it. Signage is advertising. The box and the tickets are entertainment. One invoice, two answers. Mia: Is there anything people are going to raise with us that isn't real? Harvey: One, and it comes up constantly. There was a proposal at the last election for a twenty thousand dollar deduction for small business meals and entertainment. It never became law. It's not in the legislation and it wasn't in any budget. Leo: So if a client says they heard they can claim twenty thousand dollars of lunches. Harvey: That's what they're remembering. It was a Coalition promise at the 2025 election, up to twenty thousand dollars of business meals a year for two years, not including alcohol, and the Coalition didn't form government. Mia: Let's recap. Clients, referral partners and suppliers all get the same answer. No fringe benefits tax, but no deduction and no GST credit either. Leo: And talking business over the meal changes nothing. The law says you're providing entertainment even if business discussions occur. Mia: The main exception is where you're both away from home on business. Then the meals aren't entertainment at all. Leo: Gifts are the good news. A gift to a client is deductible if it's given for a business reason, and there's a binding ruling that says so. As long as it isn't entertainment. Mia: A bottle, a hamper, flowers, yes. Theatre tickets or a round of golf, no. Leo: For your staff, a footy ticket and a corporate box are two different animals. And five per cent of a box is advertising only if there's a sign. Mia: Next week, the machinery underneath all of this. Leo: The three ways of valuing it, why the popular method costs small businesses money, what your records actually have to show, and what happens when the boss pays for the staff dinner on a personal credit card. Mia: That last one has a sting in it. Leo: It does. Nobody comes out of that story well. Mia: If you're not a client yet and you'd like a hand sorting out what you're claiming, head to aevumaccounting.com.au and book a session. Leo: Or head to aevumaccounting.com.au. And if you're already a client, bring your entertainment accounts to your next catch-up. Mia: Before we go, a quick but important reminder. The information shared today is for general informational purposes only, and does not constitute specific tax or financial advice. Leo: Everyone's situation is unique, and tax laws are complex. For personalised advice tailored to your situation, we always recommend consulting with a qualified professional. Mia: Until next time, stay savvy, stay proactive... Harvey: And send the hamper, not the tickets!