What better way to treat a client or customer than taking them out to lunch or dinner? For years, this has been the nicest way to celebrate a deal, negotiate or even just review business decisions.
However, more and more Australian businesses are being surprised at tax time when they find out that not all business lunches and meals are tax deductible.
Paying for a client’s meal is likely to come under the Australian Tax Office’s (ATO) entertainment expense, and not all of these are tax-deductible. However, according to the ATO, there are some instances when providing a meal for a client or employee does not create any entertainment. Confusing as it sounds, the most important thing to consider is how the ATO defines entertainment. Here are four ways to minimise ATO entertainment:
Provide meals and drinks for refreshment, not enjoyment.
As bad as this sounds, if the meals help employees or clients complete their work comfortably rather than take a break from work to enjoy what you are providing, this can be claimed as a business expense.
Keep it simple, Sweetie.
The more elaborate the meal, the more likely it is to be classified as entertainment. Many businesses have success by providing smaller meals like finger food and sandwiches. As a foodie myself, the more elaborate the better, but in terms of business, we all know we need to minimise expenses where possible. And getting a tax deduction always helps.
Keep ‘Refreshments’ to Work Hours
Refreshments and light meals during working hours will not be considered entertainment and will, therefore, be tax deductible.
Keep it on Premises
Strangely enough, if the refreshments (not entertainment) are consumed on your business premises, then it is far more likely to be tax deductible;
While this advice is sound, we always recommend getting an expert opinion. You can find the best tax specialists on www.serviceseeking.com.au or post a job below:
