Tax Deductions for Networking Events
Networking events allow you to generate new client leads, discuss issues with like-minded business owners and meet potential new suppliers and employees. All things that are an important part of growing a business. However one downfall is that these events can be costly for small businesses! Being able to claim a tax deduction for these cost obviously assists with this financial burden.
Generally speaking, you can claim a tax deduction for any costs that you have incurred which have a direct relationship to earning your business income. https://www.ato.gov.au/business/income-and-deductions-for-business/deductions/
Of course, there are exceptions which include:
entertainment expenses and traffic fines
private or domestic expenses
expenses relating to earning income that is not assessable, such as money you earn from a hobby
Relevant in the instance of networking events is the Entertainment rules. If the event includes the provision of food or drink there is a chance that this may be considered "entertainment" for the purposes of the tax law. Entertainment expenses are non deductible. TR 97/17 provides some guidance on how to determine if a specific cost is "entertainment" for the purposes of these laws. The ruling outlines 4 questions that should be answered:
why the food or drink is being provided - if the food or drink is incidental to the purpose of the event or could be considered sustenance or refreshment then they will not have the character of entertainment. If however the purpose of the event is purely for the enjoyment of food or drink, then this would be considered entertainment.
what type of food or drink is being provided - a light meal would generally not be considered entertainment, however the more elaborate a meal (eg 5 course lunch!) the more likely it is to be entertainment.
when that food or drink is being provided - if provided within work hours this is less likely to be entertainment, outside of work hours then more likely.
where the food or drink is being provided - if provided at a restaurant or offsite, the more likely this is to be entertainment compared to onsite in your office or a clients premises.
If there is a genuine belief that attending an event is for the purposes of business growth and development or new client generation and any food or drink provided is incidental, there is a reasonable basis for arguing that the provision of food and drink is not entertainment. If this is the case, the costs of the event should be deductible to the business.
If you are unsure about how this applies to your specific circumstances or events, be sure to query this with your accountant!
This post is not advice. You should not act on the basis on this information alone. Please seek professional advice directly if required.