Deductibility of gifts provided to clients
The ATO has confirmed that a taxpayer carrying on business is generally entitled to a deduction for expenses incurred on a gift made to a former or current client.
The gift must be characterised as being made for the purpose of producing future assessable income.
However, the expense may not always be deductible (e.g., if the gift constitutes the provision of entertainment that is not deductible).
The ATO’s recent determination also highlights that a deduction will be denied where expenditure on gifts is more accurately described as being ‘private’ in nature (for example, where a gift is provided to a relative outside a business’ usual practice of providing client gifts).
Deductibility of airport lounge memberships
The ATO has also confirmed that the cost to a business taxpayer of a yearly airport lounge membership (e.g., Qantas Club, Virgin Lounge) that will be used by its employees is ordinarily deductible, and should not give rise to any FBT liability for the employer (even if the majority of (or indeed only) use of the airport lounge membership is for private purposes).
If you would like further information on deductible items, contact Pepperell & Associates