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The Coalition has announced a proposed $20,000 tax deduction for business-related meal and entertainment expenses ahead of the upcoming election.
COSBOA welcomes Coalition’s $20k tax deduction proposal
21 January 2025
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9 minute read
Groups such as the Council of Small Business Organisations Australia have voiced their support for the $20,000 small business tax deduction proposed by the Coalition but others have warned it could create complexity.
Leader of the opposition, Peter Dutton, announced on Sunday (20 January) that if elected, the Coalition would look to introduce a capped tax deduction of $20,000 for business-related meal and entertainment expenses.
The deduction would be available to small businesses with a turnover of up to $10 million with alcohol excluded from the policy. The measure would run for an initial two years and be exempt from Fringe Benefits Tax.
Dutton said the proposed deduction would offer include dual benefits.
“This is a win for small businesses spending the money on their staff or clients, and a win for the hospitality venues who will see an increased spend in their businesses. It will help businesses recover from a horrible period under three years of Labor,” he said.
The Coalition noted that small businesses were a huge part of the economy and needed to be supported and looked after to supplement the economy, the community and workers.
The Institute of Public Accountants general manager of technical policy Tony Greco said the proposed tax deduction sounded promising for SMEs; however, the rule around entertainment was one clear example of the myriad of hoops to be navigated.
Greco noted the exemption from FBT was an interesting point as it was a 'bugbear' for any business to comply with its outdated rules and could have the potential of becoming a nightmare for tax practitioners.
“Whilst the announcement sounds good, it creates another exception to the myriad of rules already existing,” he said.
“It’s just not just about FBT as you need to understand the interaction of the FBT rules with income tax and GST. There are long winded tables showing when meal entertainment is subject to FBT and whether it is deductible and when a GST input tax is allowable.”
“It’s a dog’s breakfast of interactions which can trip even the most seasoned practitioner trying to comply with the rules.”
COSBOA CEO Luke Achterstraat said the announcement came at a critical time for hospitality and would provide a real ‘shot in the arm’ for small businesses facing a tough operating environment.
“With record insolvencies and higher costs facing small businesses, we need to inject as much confidence as possible and induce people back into restaurants, cafes, shows and experiences,” he said.
“If you want more of something, then you should tax it less. This tax deduction will encourage people to back their local hospitality businesses by providing a real financial incentive to do so.”
“We hope to see many small businesses utilise the potential scheme to reward their hardworking employees and to engage with their clients to strengthen relationships.”
COSBOA also noted the proposed deduction would reduce red tape for small businesses and avoid duplication with navigating the fringe benefits tax system.
Based on the current complexity of the regulatory environment, it would be better for small businesses if there was less time spent on duplicating paperwork, according to the SME body.
Achterstraat said the Australian small business community was looking for leadership from major parties this year with the looming election.
“This targeted initiative is welcome and we look forward to seeing small businesses play a central role in the election. There are 2.5 million small business owners in Australia all with a vote; many are at a crossroads and will be watching this election closely,” he said.
“Without significant support for the engine room of the economy, our economy will see fewer businesses operating, reduced competition, productivity, and be stuck with higher prices for longer.”
COSBOA said if the opposition was elected and this deduction was enforced, it would empower small businesses to focus on their core business and “do what they do best” in delighting customers and investing in staff.
Shadow treasurer Angus Taylor said he believed small businesses would always be ‘better off’ under a Coalition government.
“This is a fiscally responsible down payment on our commitment to lower, simpler, fairer taxes and rebuilding Australian businesses,” Taylor said.
“It builds on our commitment to rebuild small business by making the Instant Asset Write Off permanent, saving more than 98 per cent of businesses the hassle of dealing with depreciation schedules when they invest in their businesses.”
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- Actual Entertainment very rarely excludes Alcohol so this will be an absolute compliance headache in terms of the need obtain a Tax Invoice from the hospitality venue and then to split out the itemised "invoice" on a line by line basis.
Just include alcohol and be done with it.1 - Last time I checked S8-1(2) of the tax act excluded personal use expenses.
Individual taxpayers cannot get a free lunch, so why should businesses?
Surely you all remember why the long lunches were removed by a government with "guts".
They were rorted.
And who would benefit the most from this? The government. They are the largest employer/business aren't they. As a business they would have the most free lunches!
Our current economic climate is seeing people spend much less on entertainment type costs. The cost of living pressures are very high. If you want to change this, you need to get the price of food/living down.
Making this a tax deduction may have a reverse impact and see prices rise. The same happens when successive governments offer new home build grants. The price of house construction suddenly goes up by the same amount of the grant, irrespective of costs.
I smell Pork!0 - This just adds to the complexity of the tax system. There is now a further need to distinguish between different types of tax payers. More time needed to be spent.
When entertainment was deductible is was just a rort. I guess the tax saved on a claim of $20,000 pays for our tax agent's fee.0 - what a wast of money no benefit to the real small micro busniss they cannot afford to spend $20000 on food and entertainment, about what i would expect from silvertails0
- There seems to be an assumption that SMEs have available surplus cash to spend on additional entertainment and meals?0
- Ill wager they didn't ask where the money is coming from.
Can't understand why Cosboa is happy with the deficit blowing out even further and pushing up interest rates
Can anyone explain it for me0
