Updated: Jun 28
Let’s start by saying that “Entertainment” is not tax deductible.
That’s the easy part. Now we need to define “Entertainment”.
When deciding whether or not something is entertainment we need to ask 4 questions:-
Why? What? Where? And When?
“Why” was the expense incurred. Was it for social or business reasons?
“What” was included. Was it meal and wine at a restaurant or coffee and cake in a café?
“Where” did you go. Was the expense incurred in your office or off premises somewhere?
“When” did you hold the meeting. Was it during business hours or on the weekend?
The ATO has said that they do not consider the purchase of a light meal (such as sandwiches, salads and orange juice) to be entertainment.
The more elaborate the meal and the setting the more likely it is that it will take on the characteristics of “entertainment”.
So, using the above criteria, if you have taken a client to a restaurant on a Saturday evening and enjoyed a three-course meal and a bottle of wine while discussing business, it is going to regarded as “entertainment”.
If you have coffee and cake with a client at 10am in your local café whilst discussing business, then it is more likely to be regarded as tax deductible.
This is even more so if you do not have a dedicated office and so you work from home with your local café being a common meeting place. However, if you are at the café purely for social reasons it will not be a tax deduction.
Also keep in mind that entertainment is not deductible no matter what you call it. Calling it networking or marketing makes no difference.
This is a basic summary only. Each business situation can differ and if you are in need of information for your own situation then get in touch with your accountant.
Better still, give Mary-Louise a call on 0422 391 370.