On Monday 19th April 2021 the Australian and New Zealand federal governments plan to lift international border restrictions between the two countries. As a result of the travel ban coming to an end corporate events will become a more frequent occurrence “extravagant” corporate events are likely to pique the interest of the Australian Tax Office.
Australian and New Zealand businesses need to be conscious of organising and hosting tax-deductible corporate events that offer superfluous entertainment. For those who are organising work-related functions you will need to be aware of the adverse income tax and fringe benefits tax (FBT) consequences when the agenda of an event is more about having fun rather than for business purposes.
It is important for businesses to understand that the Australian Tax Office pays close attention to extravagant expenses provided at swanky locations, with pleasant diversions on offer and lots of private time on the agenda to enjoy them.
Event organisers can achieve ‘win-win’ outcomes, a tax-deductible business event with no FBT exposure. Protecting GST input tax credit entitlements is also an important business consideration.
The opening up of Australian borders to New Zealand has led to optimistic forecasts for domestic travel, too, which is expected to see growth fuelled by corporate travel.
A report released by Deloitte at the start of April predicts increased travel due to “pent-up demand”, as a result of increased consumer confidence off the back of the pandemic and the government stimulus that accompanied it.
The report from Deloitte is predicting domestic overnight trips will grow to 113 million trips by the end of this year, just shy of levels seen in 2019, given covid-19 remains in control domestically and the vaccination rollout continues undisrupted.
The same growth trajectory anticipates to see domestic overnight trips reach 125 million by the end of 2022, and up to 134 million trips domestically by 2023.
Despite the pandemic’s devastating impacts on the tourism sector, over 5,000 new hotel rooms hit the market in 2020, according to the report, with a further 32,000 new rooms set to be added to the country’s hotels, 40 per cent of which are expected to open in 2022.
In a world after JobKeeper, Australians will be looking to businesses to “open their wallets” and support the events, travel, and hospitality industries. For businesses who intend to plan corporate events it is advised that they consult their accountants on the potential tax risks they might expose themselves to.
Accountants should be asked whether the food, drink or recreation activities available at the planned event are offered in an entertainment context, or instead a by=product of the function’s main objective. Businesses should also check if there are income tax and FBT concessions available to them.
Events that fall into the high-risk category, are events that include benefits to family and options for extended stays, or holidays.
Another tax trap some employers fall into is arranging an event that passes the tax tests and then paying for a tacked-on holiday, with family members flown in to share the fun.
Regardless of whether they take place in Australia or New Zealand post-covid get togethers, can be planned to achieve lots of good business objectives and allow participants to have some fun, without nasty tax surprises.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
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