Meal entertainment - deductible or not?

Identifying the correct tax treatment for food or drink provided to employees can be a challenge as there are many rules to consider. Tax deductibility depends on whether the food or drink is considered to be “meal entertainment”.

The Taxation Office considers various factors in determining this. These essentially examine what type of food and drink is being provided, and also when, where and why it is provided. As a general rule, if more elaborate food and drink is supplied for social purposes (particularly at a venue off the employer’s premises) then meal entertainment will arise.

Meal entertainment

Typical examples of “meal entertainment” include a business lunch at a café or restaurant, or food and drink consumed at a social function held on or off the business premises. This type of expenditure will either be subject to fringe benefits tax or treated as non-deductible for income tax purposes.

Non-meal entertainment

The following examples are not considered meal entertainment and are therefore deductible:

	Light meals (sandwiches, muffins etc.) consumed on your business premises during a work meeting or while working overtime
	Tea/coffee consumed with a pastry or muffin at a café during a work meeting
	Light refreshments at a training seminar
	Meals consumed while travelling
	Light meals provided to employees on an employer’s premises

As you can appreciate, meal entertainment is a complex area where many rules (and exceptions to these) exist. We recommend that you contact us should you have any queries in relation to this matter.

Published : 12 September 2007