Often opportunities come up to provide sponsorship for events or competitions and if you’d like to claim these in your business there needs to be a direct relationship between the expenditure and you being able to gain customers or sales from it.
Sponsorship is different to advertising or donations in the way that the business spending the sponsorship money intends that their business will be promoted in some way, but that the recipient, or some other person, will also benefit in some manner other than by receiving ordinary income from business or income earning activities.
With an entertainment portion – the cost of sponsorship is only 50% deductible if the entertainment is more readily available to employees and business contacts than to members of the public. Eg A restaurant pays for a soccer team’s uniforms which have the restaurant’s name on them. The cost of providing the uniforms is fully deductible. However, if the restaurant provides meals for the team, at the grounds, immediately after the game, it will be 50% deductible because they are being provided away from the taxpayer’s business premises.
If you’re thinking of doing business sponsorship and just want to check the deductibility please contact us.
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