A lot of confusion can occur amongst startups and whether or not they can claim their business lunches as a tax deduction. In order to help eliminate some of the confusion there are a few simple steps that you can follow in order to determine whether you these expenses are tax deductible or not.
The questions that you should ask yourself, are as follows;
- Why is the food or drink being provided? What is the purpose of the food and drink being provided, if it happens to be a social setting than the chances are this is entertainment.
- What food or drink is being provided? As your meal starts to take a more elaborate form, for example there is matching wines, its starts to take the form of entertainment.
- When is the food or drink being provided? If a meal is provided during work hours than the chances of it being classed as entertainment are less likely. You do need to consider though whether or not it is social.
- Where is the food or drink being provided? If you consume the meal on your premises than its not likely to be considered entertainment. However if you go to a restaurant it is difficult to say its not entertainment.
Continue reading “TaxTipTuesday: I am having a lunch with a client. Is it tax deductible?”
“Is my business lunch a tax deduction” was our article last month for leading Start-Up publication, Shoe String Why? Because it is one area which causes a lot of confusion and start-ups and small businesses want to understand whether meals (and coffees) can be claimed as a tax deduction.
It’s not a black and white area so we thought that some simple tips can help go a long way in working out whether you can claim a tax deduction. So what are the questions that you should ask (and that the ATO wants you to consider):
- Why is the food or drink being provided – i.e. what is its purpose of the event. If it is provided in a social setting, then the chances are that is is entertainment
- What food or drink is being provided – is it a light meal provided at work or is it a set menu with matching wines. As the meal starts to become more elaborate, it starts to take the character of entertainment
- When is the food or drink being provided – meals provided during work hours are less likely to be entertainment, however with this point it’s especially important to consider the purpose and whether it is social.
- Where is the food or drink being provided – meals consumed on your business premises are less likely to be entertainment. At a restaurant, it is difficult to say it isn’t.
It’s important to consider these initial steps to help you work out whether you can claim a tax deduction on meals (and coffees).
And for more information on this, and the next steps we take at Nudge, you can read my article here.