Expenses are deductible provided they are incurred in producing taxable income or while carrying on in business. Section 32.5 of the Income Tax Assessment Act (1997) prohibits deduction for entertainment expenses.
Entertainment by way of food, drink, recreation or accommodation or travel undertaken to provide entertainment by way of food, drink or recreation are not deductible. ATO uses a number of different factors to determine if food or drink provided would be termed as entertainment.
‘Why’ is the food or drink provided?
Businesses may claim expenses for food (biscuits) or drink (coffee) provided to employees to complete their tasks during a working day. Where the purpose is for employees to enjoy themselves in a social situation then it would be termed entertainment and not deductible.
‘When’ is the food or drink provided?
When the food or drink is provided during working hours it is more likely to be termed as means of sustenance than entertainment.
‘Where’ is the food or drink provided?
Food or drink paid for at a restaurant or pub is more likely to be considered entertainment but if provided on premises is again likely to be sustenance than entertainment.
The above-mentioned factors are general guide only and none of them alone can determine if the food or drink provided is entertainment. Some businesses can register for FBT and claim a portion of the entertainment expenses. We recommend you to consult our team for clarification on whether your expenses are claimable or not.
For further assistance, please contact Taxplanners on 1300 000 TAX (1300 000 829), 03 9600 0143 (10 Lines).
You can also visit our office for assistance –
Melbourne CBD – Suite 411-413, Level 4, 343 Little Collins Street, Melbourne
Werribee Office – 88 Watton Street, Werribee, Contact – 03 901 MY TAX (03 9016 9829)