Entertainment rules – know your lunches

As the end of the year starts to loom and the weather heats up it’s a perfect time to head outside for lunch – but can you claim it?

As mentioned earlier, when it comes to food and entertainment, the amount you can claim may depend on; what you buy, who it’s for, and where the entertainment is provided.

Entertainment is either 50% deductible or 100% deductible for tax. Business related travel is 100% deductible

Let’s look at a couple of examples:

• During work hours you head out to lunch with a friend – there is no link (or in legal terms ‘nexus’) between this and your business. This is private. Ideally, pay it out of your personal account, or if you must use your work account, put it to Drawings.

• You head out to lunch with a friend. Your friend happens to a supplier of yours and during your lunch they update you on their pricing changes. This is a work lunch, with a private element. Code it as entertainment (only 50% will be claimed for tax, either you can split this out as you go or your accountant can adjust this at year end).

• You have travelled to another town to meet with some clients. You buy some lunch for yourself. Your clients didn’t come to the lunch. This is a work lunch – code it as Travel. When out of town for work all reasonable costs can be claimed 100%.

The specifics can be important, and your accountant can advise you on the best way to narrate your transactions to ensure the correct treatment at year end.