Can I Claim Client Entertainment as a Business Expense in Australia?
Rarely, Australian businesses generally cannot deduct entertainment expenses (meals, drinks, recreation) under ITAA s32-5. Limited exceptions: FBT-paid entertainment, in-house cafeteria, or food provided in working overtime.
Finn does your books in Australia
AccountsOS keeps the books for Australia businesses, tracks tax deadlines and handles expenses, in plain English. Ask Finn about yours, no signup needed.
What Australian Taxation Office (ATO) says
Section 32-5 ITAA 1997 disallows entertainment expenses. Section 32-20 provides limited exceptions where Fringe Benefits Tax is paid on the entertainment, or the food is consumed in the course of working overtime, or in an in-house dining facility. GST input credits are also denied where the expense is not deductible. Entertainment covers food, drink and recreation, and also accommodation or travel connected with an entertainment event. The deduction is denied whether or not the expense is incurred to earn income. If an employer provides entertainment to employees and pays FBT, the employer can claim the deduction and the GST credit. Taking a client to dinner is not covered by this route unless the client is also an employee or associate who is subject to FBT.
When you can claim
- Light refreshments at staff meetings (sustenance, not entertainment)
- Food provided in working overtime (limited)
- Entertainment subject to FBT (taxed as benefit, then deductible)
- Entertainment provided in an in-house dining facility for staff
- Seminar, conference or training where the main purpose is learning and the food is incidental
When you cannot claim
- Client lunches and dinners
- Tickets for sport, theatre, concerts with clients
- Drinks with prospects after work
- Christmas party entertainment outside specific FBT exemption thresholds
- GST credits on non-deductible entertainment, which are also denied
Good to know
Pro tip: Separate entertainment from other costs in the books on the day of purchase, using a clearly labelled account. Gifts that are not food or drink, and that are not entertainment, are treated separately and can be deductible.
Important: FBT-related entertainment is a complex area. The 'minor benefits' exemption (under A$300 per person, infrequent) can sometimes apply to client gifts but rarely to meals.
Stop guessing what you can claim in Australia
AccountsOS automatically categorises expenses with Australian Taxation Office (ATO)-aware rules and tells you exactly what is claimable.
Try Free