Tax

Weddings, parties and an ironman: Canberra’s keen but can small business really claim these as deductions?

Patrick Stafford /

Canberra’s at it again.

The controversy over politicians’ deductions has become both ludicrous and laughable. Even the Prime Minister has been thrown into the fray, paying back over $600 for attending Peter Slipper’s wedding.

Late last month, George Brandis paid back over $1600 for travel expenses involved in attending the wedding of radio personality Michael Smith.

Both men claim in some situations, they’ve done nothing wrong. Brandis maintains he was right in that the costs were within legal limits, while Tony Abbott has maintained costs for attending an ironman event were completely justified.

Parliamentary financial requirements and benefits aside, there is a pertinent question here: When can we claim deductions for certain activities if they fall within business guidelines?

This question is essential for business owners who attend networking gigs, conferences and other events which they consider to be “business”.

A drink with a supplier, for instance, or a dinner with clients – most business owners would suggest as long as a deal is discussed, these events are completely deductible.

Well, you’d be wrong.

Chris Ball, a tax partner at Pitcher Partners, told SmartCompany this morning there are some business owners who consider these events deductible on the basis that business is discussed.

The answer is very much, “it depends”, but for the most part, if the purpose of the event you’re attending is just entertainment, then you’re out of luck.

“Anything that comes under the ambit of entertainment, is in respect of a business owner not deductible,” Ball says.

“So that takes out things like weddings, and a wide variety of those expenditures.”

Even if you’re discussing business, there’s no luck here. As Bell describes, even a business lunch whose sole purpose is to discuss deals and prospective contracts is not deductible, because “it is by its very nature entertainment”.

So things like weddings, parties, and so on, are clearly out.

This also means work-based trips are off the agenda, if the purpose of the event is socialisation and not business.

“If you take your people away on a conference and there is a heavy social agenda, there are serious question marks about whether it’s a work conference or a social event,” he says.

“But if you go and the purpose is mostly work, with a small social component, then there is scope for that. If you go to Hamilton Island, for instance, and on an afternoon you go out to the Great Barrier Reef, then airfares and accommodation are still deductible – the cost of the afternoon trip won’t be.”

But what about Tony Abbott’s ironman event? The Prime Minister claims this was within the realm of appropriate expenses, as it related to his work.

Can a business owner claim the same expense for a similar event?

As it turns out – quite possibly.

If you send your staff, or even yourself, to a charity event such as a triathlon or fun run, you can deduct the entry fee and even travel expenses. The purpose of the event is not entertainment, so you could be in the clear.

And a sweet bonus – the wages of staff attending on the day are tax deductible as well.

“It’s in the interests of the business to attend these community-style events,” Ball says. “If there is a cost in getting people there that is tax deductible, it’s just not deductible if it’s a lunch or some other type of function.

“You just need to remember the rules on food and drink, which are not deductible. Particularly if there’s alcohol involved.”

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Patrick Stafford

Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.

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