Most of you small business owners love a coffee with a client, I know I do, the question should be answered for those of you who are wondering, Is it a deduction for tax or not?
(Putting on my tax hat) There are two types of people in business – those registered for Fringe Benefits Tax and Those Who Aren’t.
- Those who
are,can claim these expenses as a deduction – they must lodge an FBT Return each year and pay tax on those Fringe Benefits.
- For those who aren’t registered to lodge FBT Tax Return – that is, most of us – read on.
This scenario of having a coffee at a coffee shop with a client is NOT deductible.
You might say hang on a minute – I do this in anticipation of getting work, its work related. Maybe so BUT I would counter that expenses that are associated with the earning of assessable income are specifically excluded IF they are excluded by Specific Legislation. This is one of those times.
This is the link http://www5.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s8.1.html
S8-1ITAA1997 This is what’s known in our circles as Big Daddy. It provides the general layout of how deductions work in the Australian Taxation System,
Did you see it lurking in 2(d)?
Here is another link to help you when it comes to Entertainment
Other scenarios covered by “its entertainment and therefore not deductible” includes
Another scenario related to coffee shops is – taking your laptop to a café to do work. Is the cost of lunch and a coffee Tax Deductible– after all you are working!
Sorry, nope. It’s not deductible. Entertainment is defined in this scenario by the café itself – it is a social setting
For those of you who work from home – Can you buy a coffee at a coffee shop and bring it back to your home-office and claim it as a deduction?
A lot of deductions are bound up in the concept of Substantiation. This means having a Tax Invoice for it. Or a diary entry in some instances but context matters and knowing how these deductions work may help you when you ask your accountant about them.
It’s not as easy as it sounds managing the necessary paperwork to substantiate your claims. You can’t just say I want the deduction. You must be able to substantiate your claim to your Tax Accountant and the ATO if required.
There are other rules around
I run an Accounting business called Rapid Entry Online Accounting and help Micro and small businesses figure out what can be claimed and what can’t. Visit my website and book a Discovery Call!
Copyright Dianne Jewell 2019 All