It is time to change the tax treatment of Entertainment

Between February and May there were over 838,000 jobs lost. 35% of those job losses (over 293,000) were in the accommodation and food services sector.

The best way to get these jobs back is to get people to spend money in this sector.

One such way to do this is to remove the bizarre way money spent by business on entertainment is treated for tax.

Note sure if many people understand, but if a business person takes a client to a café for lunch and spends $100, the actual cost to the business can over $132. That is because part of that lunch incurs fringe benefits tax (FBT) and the other part is non deductible for tax.

Also, if your boss gives you say a $100 cinema voucher as a reward for your great work, this could actually cost the business over $132.

Therefore, one simple way to help stimulate people to spend money in the accommodation and food services is to change the way entertainment is taxed. Ideally this should be a change for the longer term, but even a short term change for the period April 2020 to March 2021 as part of the 2021 FBT year can provide a short term stimulus to the accommodation and food services sector.

And the cost? From what I can see, in 2017-18 the government collected less than $0.5 billion on meal entertainment. About 10% of one fortnight of JobKeeper.

And this is so simple to implement. Apart from changing the laws, the government does not need to do anything different as business as unpaid tax collectors, already do all the work here.

By changing the tax treatment of entertainment in a simple cost effective manner, we can stimulate money being spent in the accommodation and food services sector. And give good business owners the ability to survive, without propping up those zombie businesses that were not viable in the longer term anyway.

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