Are Your Business Lunches Deductible?
24 March 10To see if a business lunch is deductible, you need to understand who the lunch is for. Is it for an employee, or is it for a client?
For an employee
Business lunches are normally not deductible except in very limited circumstances. They fall under the category of ‘entertainment expenses’ which also includes staff social functions and tickets to gala or sporting events.
If the lunch is at a social function off your premises, the cost is subject to FBT and is deductible.
If the business lunch is expected to be provided to employees, then they are not considered entertainment and are a legitimate business expense. These expenses do not attract FBT and you are entitled to claim GST credits and the expense as a tax deduction. An example of this is In house meals provided for a training session. You can claim a tax deduction for the cost of food and drink provided at a ‘seminar’ and is tax deductible if:
- The seminar runs for 4 hours (excluding meals, rest or recreation breaks) and is of a continuous nature
- The seminar is not a business meeting, but rather recognised as a training application
- The main purpose of the seminar must not be the advertising or promotion of the firms goods or services
- The seminars main purposes must not be related to entertainment
- There must be a conference, convention, lecture, meeting, speech, Q & A session, training session, or educational course
For a client
If you are taking a client or referral partner out to lunch for the purpose or marketing or building your business is still considered business entertainment. Therefore it is not deductible unless you and your client are travelling.