Is Coffee Tax Deductible? All Your Questions Answered:
For those working in the office, is coffee tax deductible? Coffee is a staple in every office these days. Whether you’re holding a client meeting or simply brainstorming with your team and colleagues, coffee is a must. This black elixir helps you stay alert and is also an excellent social lubricant, keeping everyone in good spirits.
So, of course, getting good coffee machines and coffee beans for the office will be an investment that will pay off in the long run. Now, when you’re making any kind of investment in your office, you would naturally want to know if is coffee tax deductible. Essentially bringing up the very question:
“Are coffee beans and coffee machines, and anything else involved in a meeting that is coffee tax deductible?”
We’ve spoken about how to claim a coffee machine at tax time, but now we’re delving further into the Australian Taxation Office (ATO) guidelines for tax deductions. With this knowledge, you can make the right decisions for your business and potentially save money at tax time.
In this blog, we will be discussing and answering questions on whether is coffee tax deductible.
- Can You Claim Coffee As An Office Expense?
- What Are ATO’s Rules On Business Expenses?
- What Is Considered An ‘Entertainment Expense’?
- When Is Coffee Tax Deductible?
So, without wasting any time, let’s get started on figuring out if is coffee tax deductible.
Can You Claim Coffee As An Office Expense?
The tax season is just around the corner, and you know what that means. Most of the country will be scrambling to minimise their taxes, thinking of ways to claim tax deductions. This becomes all the more important for small or growing businesses.
Say, you’ve got a brand-new coffee machine or bags of coffee beans for the office. Now, you’re wondering if it could be counted as a tax deduction under the Aussie tax system.
While we are not experts on the finer points of the Australian Taxation Office guidelines, we can tell you a thing or two about claiming tax deductions on coffee. Claiming these kinds of deductions depends on a few different factors. Keep reading to find out more!
What Are ATO’s Rules On Business Expenses?
According to the Australian Taxation Office (ATO) guidelines, businesses can claim tax deductions on most of the expenses incurred in everyday business activities. However, it does lay down some rules about what it considers to be valid business-related expenses. Here’s a brief overview of some of them:
- The expense should not be for private use
For example, if you buy an automatic coffee machine for your office, but staff don’t end up using it, this would be considered private use and the cost of the machine could not be claimed as a deduction.
- Keep receipts and records
You need to keep comprehensive expense records, listing all the expenses made in a financial cycle.
- Be aware of partial deductions
If the expense has been made for something that qualifies as both private and business use, you will be allowed to claim only a part of the expense as a tax deduction.
The important thing to note here is the exclusions listed on the business tax deductions page, and the one you’re concerned with is ‘entertainment expenses.’ This means that a lot of expenses made in keeping your clients or employees happy or ‘entertained’ would not qualify for tax deductions. However, there are some exceptions to this rule too. The next section covers that in detail.
What Is Considered An ‘Entertainment Expense’?
According to the ATO, any recreational activity, whether in the form of accommodation, drinks, or food, will be counted under entertainment expenses. This means that the social functions in your office and business lunches would all come under entertainment and, therefore, wouldn’t be tax-deductible. However, there are certain exceptions to this rule:
- Sustenance is not entertainment
Any drinks or food providing sustenance in the office, such as coffee, tea or biscuits would not count as entertainment and can be claimed as a deductible. The same goes for food brought in during staff training.
- Fringe Benefits Tax (FBT)
When you provide some form of entertainment to your employees, it is subject to Fringe Benefits Tax. FBT means that you would be required to pay additional tax for the provided benefits. It is important to note here that Fringe Benefit Tax is not applicable when you’re providing entertainment to your clients. (You can learn more about fringe benefits tax)
When Is Coffee Tax Deductible?
So, when it comes to answering is coffee tax deductible, it is when you meet all the criteria listed above. If you’re providing coffee specifically for business-related work, it can qualify for a tax deduction. Even if you’re providing coffee as a means of entertainment to your employees, you can claim deductions with FBT.
Just ask yourself the following questions before claiming these business tax deductions:
- What type of beverage am I providing?
If it is coffee, tea, or soft drinks, it wouldn’t count as entertainment, thus qualifying for tax deductions.
- When is the beverage provided?
If the coffee is provided during work hours, overtime, or even a business trip, it wouldn’t count as entertainment.
- Where is the beverage provided?
If the coffee is provided in a coffee shop or restaurant, it would be considered entertainment. However, this wouldn’t be the case if you’re providing the coffee at the place of work.
- What is the purpose of offering the beverage?
If it is provided as a refreshment, it would qualify for tax deductions, especially if it is coffee tax deductible.
The Coffee Conclusion:
That’s it. You now know everything there is to know about determining whether is coffee tax deductible. If you’ve been putting off buying that coffee machine for your office, this is your cue to get one today. Corporate Coffee Solutions can help you with that. Contact us today at 1300 729 343 to know more!