Can I claim a tax deduction for meetings in cafes?
First up, let's clarify what we're talking about here. You take your client to a cafe for a meeting, maybe you don't have anywhere suitable at home or your office to have the meeting. You pay the bill. If you're an employee of your own business then your share of the food and drink will be considered meal entertainment and subject to FBT, but what about the bit for your client? Can you claim it?
Businesses are able to provide light refreshments at meetings held on their business premises and claim a deduction for the cost of these refreshments (refer to IT 2675). This is because the ATO considers this not to be meal entertainment. What if you do not have a business premises to provide these refreshments? Can you take a client to your local cafe to buy the same refreshments and claim a deduction? Sadly, the answer is no.
The ATO considers any meal & drink consumed at a cafe to take on the character of entertainment. Why? To quote the ATO directly: “The food or drink may not provide entertainment in itself depending on the extent of the meal, but it is the setting in which it is consumed that turns the food or drink into the provision of entertainment. That is, entertainment is provided by way of food or drink, in a social situation at a cafe, despite business discussions taking place.”
What if you do not have a space suitable, or any space at all, to hold meetings? The ATO went on to say: “The fact that there are limited facilities at your business premises for meeting clients does not change the character of entertainment by way of food or drink. This is also the case where there are no business premises.”
Please note the above was largely referring to a Private Ruling (1012404860362) obtained many moons ago, however the general principles should still apply.
The bottom line is that if you provide refreshments at a cafe for clients their component will be considered entertainment meaning it won't be deductible. Anything provided to employees at a cafe will be considered meal entertainment and will fall under Fringe Benefits Tax legislation.
As always, the above is to be used as a guide only and if you have any questions specific to your situation, please get in touch.