It is a widely held belief that you can claim your client or team ‘meetings’. That is, lunch with your client or team member while discussing business. Although these meetings may be a necessary cost of doing business, in the eyes of the ATO there are certain circumstances in which only a portion of this meeting will be deductible, if at all.
The ATO classes most events with food and drink as entertainment. Meal entertainment, if no exemption apply, will attract Fringe Benefit Tax (FBT) which is 47% of the taxable value. This means you would be paying more tax than the deduction available to you. It is important to know what types of situation will be treated as Entertainment.
In order to determine when food and drink provided during client meeting is treated as Entertainment, we must consider the following factors:
- Why is the food or drink being provided?
- Providing refreshments (e.g. tea, coffee etc) – not entertainment and is tax deductible
- Providing in a social situation (e.g. beer or wine) – more likely entertainment
- What type of food or drink is being provided?
- Light Meal (e.g. morning tea) – less likely to be entertainment
- Elaborate Meals (e.g. Lobster cordon bleu) - more likely entertainment
- When is the food or drink being provided?
- During work hours (including travel time and overtime) – less likely to be entertainment as it may be for a work related function
- Outside work hours – more likely entertainment
- Where is food or drink being provided
- Provided on business premises – less likely to be entertainment
- Provided off site or at venue – more likely entertainment
Please refer to the below table which provided common scenarios of when situations are either tax deductible or not.