Tax Savings Strategy 194 | Corporate Box

Tax Savings Strategy 194 | Corporate Box

Corporate box

This strategy involves purchasing a corporate box sponsorship package for the AFL Football, rugby, horse racing, speedway, etc. For fixed price sponsorship packages the business will normally pay one fixed price for the following benefits:

  • Signage and advertising rights (This promotes the business’s name at the ground, on signage, on uniforms, on web sites and social media, and at club social functions). 
  • Corporate box facilities (Normally includes food and drink for a number of guests at given games). 
  • Tickets to a certain number of games, award nights and other functions.

The business needs to allocate the fixed price sponsorship package between the value of the signage and advertising rights (which is a tax-deductible business expense), and the corporate box facilities, tickets to games and functions (which are entertainment). The allocation should be done on arms-length market values. The Commissioner (ATO) generally treats 95% of the hiring costs of a corporate box at a sporting event as being attributable to entertainment, and 5% as deductible advertising.

Entertainment facility leasing expenses exclude the portion of the expenses that relate to food or beverages provided, or advertising that would be an allowable income tax deduction. This strategy involves using the 50-50 split method for entertainment facility leasing costs incurred by the employer. This means that 50% of the costs are non-deductable. The other 50% are deductable but subject to FBT. Under this option the after-tax cost of incurring $20,000 on a fixed price sponsorship package is $23,321. In contrast, for an individual taxpayer in the 48.5% tax bracket it would be $38,834.

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