Buying a client some coffee or lunch may seem a necessary business cost, but will the tax office give you a deduction for it? Frustratingly for small business owners, the tax rules around wining and dining clients are not black and white.
When you pay for your clients’ food, drink or recreation in the context of meetings, business lunches and social functions, you are likely to incur what the ATO calls entertainment expenses, which are not tax deductible.
However, the tax office also says that entertainment doesn’t occur every time you provide food or drink (Tax Ruling TR 97/17 ), meaning there are instances when you can deduct these costs against your income.
Confused? Here are some pointers to help you work things out.