Can I claim meals as a tax deduction?
One area which causes a lot of confusion among businesses is whether they can claim meals as a tax deduction.
It gets really tricky, and is not a simple yes/no answer. In some instances the Tax Office will allow a tax deduction in your business tax return for your meal. In other instances, the Tax Office will consider your meal as "Entertainment". When classed as "Entertainment", you are also subject to Fringe Benefits Tax (another tax).
What causes a lot of confusion on this topic is that the ATO has not provided a clear definition of entertainment when it comes to meals. They have, however, provided some examples which we use as a guide, and which asks four questions to reach a decision as to whether your meal is entertainment or not.
c) 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.
These four questions cannot be considered by themselves, but must be considered collectively, with questions 1 and 2 being the most important according to the ATO.
(ii) Your meal (as a form of replenishment, as opposed to being substantial/ excessive) is consumed whilst travelling for a business-related purpose, e.g. to attend a conference.
(4) Morning and afternoon tea consumed on business premises (think the biscuit tin and coffee machine) is not treated as a meal, but a refreshment and is tax deductible.
Remember; always track your numbers when it comes to those business lunches. It's important to know where your money is going (even if you can't claim it as a tax deduction).