Tax Return:: Tax Deduction: Meals, Entertainment, and Functions

Hello, this is your tax accountant, P&C Tax Professionals.

In this blog post, we will explore tax deductions for meals, entertainment, and functions, shedding light on the key concepts, qualifying expenses, and important considerations. Whether you’re a business owner looking to optimise your tax strategy or an employee curious about deductible expenses, this guide will equip you with the knowledge to make informed decisions and leverage these deductions to your advantage.

<Meals and snacks>

Except for specific cases involving travel and overtime, the expense incurred for meals and beverages is generally considered private in nature and therefore non-deductible.

Example: Purchasing food at work

For instance, let’s consider the scenario of Caitlan, who works an evening shift at a movie theatre. During her extended break, she purchases dinner and often buys packets of chips and water as snacks to consume during her shift.

In this case, Caitlan is unable to seek a deduction for the expenses incurred on her snacks or evening meal. The cost of the food and beverages she purchases remains personal and unrelated to her employment responsibilities, thus making it non-deductible.

Likewise, the expense of a meal purchased while transitioning between different jobs cannot be claimed as a deduction.

Example: Purchasing meals between jobs

Let’s consider the example of Steven, who holds two jobs as a bank teller and a cashier at a liquor store. After completing his shift at the bank at 5pm, he proceeds to work at the liquor store starting from 6pm. Prior to commencing his second job, Steven purchases an evening meal.

In this scenario, Steven is ineligible to seek a deduction for the cost of his evening meal. The expenses incurred for food and beverages remain personal in nature and are not directly associated with his employment responsibilities, making them non-deductible.

In most cases, you can typically request a deduction for the expenses of meals when you are traveling and staying overnight away from your residence for work-related purposes. Additionally, you may also be able to claim a deduction for the cost of a meal that you purchase and consume while working overtime.

<Overtime meal expenses>

In general, the expenditure on meals and beverages during work is considered a private expense and cannot be deducted.

However, there is an opportunity to claim a deduction for meals consumed during overtime hours, subject to certain conditions as follows:

> The meal should be purchased and consumed while working beyond regular hours.

> You must receive an overtime meal allowance as specified in an industrial award or enterprise agreement.

> The overtime meal allowance must be documented on your annual income statement and declared as income in your tax return.

Purchasing and consuming a meal while working overtime can be considered an expense directly incurred in the process of earning your employment income.

You cannot claim an overtime meal deduction if you:

> Did not personally purchase the overtime meal, such as when your employer provides the meal or reimburses you for its cost.

> Did not consume the meal while actively working overtime, such as when you eat the meal during your commute home after completing your overtime hours.

> Did not receive an overtime meal allowance specifically intended for purchasing meals during overtime work and you did not declare this allowance as income in your tax return.

An overtime meal allowance refers to:

> An amount provided by your employer for the purpose of purchasing food and beverages.

> A payment specifically designated for working overtime.

> A payment that is received based on the provisions outlined in an industrial instrument, such as an award or enterprise bargaining agreement.

> Intended to reasonably cover the expenses associated with the food and drink consumed during the overtime period.

<Entertainment and functions>

The expenses incurred for attending functions or engaging in entertainment activities that involve food, drink, or recreation are not eligible for a deduction. This includes various events, dinners, dances, cocktail parties, and other similar occasions. Regardless of whether they exclusively involve your work colleagues, discussions related to work take place at the event, or attendance is mandatory, these expenses cannot be claimed as deductions.

To ensure compliance while making the most out of the tax deductions you can claim on your tax return, it is best to consult with a tax professional or refer to the tax guidelines set out on the Australian Taxation Office’s official website. In the meantime, if you have any further questions or enquiries, feel free to reach out to us through our official Facebook Page (P&C Tax Professionals – Australia) or send us a message to pnctax@naver.com.

Thank you and bye for now!