The short answer is, if the gift is classed as entertainment then NO, the expense is not tax deductible, however if the gift is not classified as entertainment, then YES it is tax deductible. Entertainment normally relates to immediate consumption of the item.
Examples of items that would generally constitute as entertainment include:
- Theatre Tickets or Sporting Tickets
- Holiday Accommodation
- Hired Entertainers
Therefore, if you provide the above gifts to your clients or customers, these expenses would not be tax deductible.
But, turning a negative into a positive, if you provide the following types of gifts, then you can claim it as a tax deduction.
- Bottled Spirits, Wine or Beer
- TV Sets
- Gift Vouchers to generic organisations such as Myer, David Jones and Westfield. If vouchers are for Ticketek, then no deduction will be available.
We had a client who was providing restaurant vouchers for end of year client gifts. This was not tax deductible as it was classed as entertainment. After they discussed the matter with us and we clarified with our professional accounting body, the client now provides Westfield gift vouchers, which are tax deductible.
We hope this helps you with deciding which gifts you give to your clients or suppliers, particularly at this time of year.