The Melbourne Cup runs next Tuesday, 3 November, and plenty of local businesses will be booking a long lunch for the team. It’s a great way to say thanks, but the tax treatment depends on where you go and how much you spend per head.
The $300 rule
A Cup Day lunch with drinks is generally entertainment. For staff and their partners:
- Under $300 per person (GST inclusive): usually no FBT under the minor benefit exemption, but no tax deduction and no GST credits either.
- $300 or more per person: FBT applies at 47% on the grossed-up value, although the cost becomes deductible and you can claim the GST credits.
- On your own premises on a working day, staff only: food and drink for employees is generally exempt from FBT, but again not deductible.
- Clients who come along: no FBT, but no deduction or GST credits for their share.
One catch: if your business uses the 50/50 split method for meal entertainment, the minor benefit exemption isn’t available.
Our tip
For most small businesses, keeping the per-head cost under $300 is the simplest outcome. Keep the receipt and a list of who attended, and remember the Christmas party is a separate event with its own $300 test.
Planning the end-of-year party and gifts too? Ask our Dee Why team before you book.
This is general information only and not personal advice. Source: ATO, Common entertainment scenarios for business.
