Which Regime? – Entertainment or FBT Example:
ToyCo Ltd provides incentives for its sales staff to meet targets during the year. The company provides an overseas holiday for the sales representative who has been successful in growing sales in the financial year.
The sales representative is entitled to take their family on a two week holiday on the Gold Coast. The employee may take the holiday at any time within the next 12 months.
Entertainment expenditure or FBT regime?
The expenditure on holiday accommodation, would seem to be of a type of Deductible Entertainment, which is subject to the 50% deduction rule.
However, the employee does NOT consume the expenditure as part of their employment duties, and can choose when to enjoy the travel. The travel is also undertaken outside of NZ.
Therefore, the expenditure is a benefit, provided in respect of or in relation to the sales representative’s employment, and subject to FBT regime.
The employer will thus be able to deduct the full cost of the expenditure as a cost of employment.