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Jun 29

Can I Claim a Tax Deduction for Taking Staff or Clients Out to Lunch?

claiming on client or staff lunches

One area that causes a lot of confusion for small businesses is whether the cost of meals (and coffees) with both potential and existing clients can be claimed as a tax deduction.

And what about staff lunches? Can you take staff out for lunch to discuss business and claim a deduction?

Expenses such as these are classified as ‘Entertainment’ and are generally not tax deductible. ‘Entertainment’ expenses include business lunches and drinks, cocktail parties, sporting events, etc. Whether they are deductible must be reviewed on a case by case basis.

Factors influencing the deduction include:

• Why is the food/drink provided? – is it for refreshment or social?
• What food/drink is being provided? – is it a light meal or more elaborate meal? Is alcohol being provided?
• When is the food/drink being provided? – is it during work time, overtime or after hours?
• Where is the food/drink provided? – is it on business premises or off site at a function/restaurant?

Some common food and drink scenarios are listed below:

Type of Food & Drink

Deductible

Not Deductible
Tea or coffee on business premises

X
Pastries, muffins, sandwiches, fruit & juice consumed during a work meeting on business premises

X
Birthday Cake consumed on premises

X
A light meal/drink consumed on premises while working overtime

X
A light meal/drink consumed by an employee at a café during a meal break on a work day

X
Breakfast, lunch or dinner at a restaurant for a business networking meeting

X *
A business lunch at a café or restaurant

X *
Food/drink consumed while an employee is travelling overnight on business for work purposes

X
Food/drink consumed at an overnight business or work-related conference.

X
Light refreshments at a seminar

X
Friday night drinks at the office

X *
Food/drink consumed at a social function held off the business premises

X *
Food/drink consumed at an awards night

X *
Client Gifts (a bottle of wine or Christmas Hamper)

X

* Typically not deductible, however if the costs attracts Fringe Benefits Tax (FBT), the cost becomes deductible and GST is claimable.

We are a small business accounting service located on the beautiful Sunshine Coast and would appreciate the opportunity to help you, your friends, family and colleagues. Contact us on 07 5451 1118 for an obligation-free confidential discussion today.