Private ruling: Dinner expenses
Date of advice: 19 August 2019
Published: October 2019
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the cost incurred in attending a Gala Dinner an allowable deduction? | A1: No.


Relevant legislative provisions: Section 8-1 of the Income Tax Assessment Act 1997 | Section 32-5 of the Income Tax Assessment Act 1997 | Section 32-10 of the Income Tax Assessment Act 1997 | Subdivision 32-B of the Income Tax Assessment Act 1997

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income, or a provision of the ITAA 1997 prevents it. Section 32-5 of the ITAA 1997 provides a general prohibition on the deductibility of entertainment expenses under section 8-1 of the ITAA 1997. Entertainment is defined in section 32-10 of the ITAA 1997 and includes entertainment by way of food, drink or recreation. Business lunches and social functions are examples of what is entertainment. Subsection 32-10(2) of the ITAA 1997 states that you are taken to provide entertainment even if business discussions or transactions occur. Subdivision 32-B of the ITAA 1997 provides some exceptions, such as for some seminar expenses, however, none of the exceptions apply to your situation. The Commissioner's view on the deductibility of entertainment expenses incurred by Members of Parliament is outlined in Taxation Ruling TR 1999/10 Income tax and fringe benefits tax: Members of Parliament - allowances, reimbursements, donations and gifts, benefits, deductions and recoupments . Paragraphs 185-191 of TR 1999/10 outlines when attending a function is an allowable deduction. Attending a function for a work related purposes such as a school's parents and citizens meeting where finger food is served is an allowable deduction. However, as highlighted in paragraph 188 of TR 1999/10, a deduction is not allowable for the cost of attending functions, if a more substantial meal, perhaps in the form of a sit-down dinner, is provided. This is because the 'meal' is not merely incidental to the main purpose of the gathering - it is entertainment. In your case, the cost of you and others to attend the Gala Dinner is similar in nature to a business lunch and is regarded as a social function. Such a function is regarded as an entertainment expense under Division 32 of the ITAA 1997. Although you were encouraged to attend the Gala Dinner, this does not change the character of the expense. Paying for your attendance as well as the others at the two tables is not an allowable deduction. It is acknowledged that you received an electorate allowance, however as highlighted in paragraph 9 of TR 1999/10, the receipt of an allowance does not, in itself, entitle you to a deduction. Although attending the function is connected to your current role, the entertainment provisions in Division 32 of the ITAA 1997 deny a deduction. Therefore, no deduction is allowed for the cost incurred for the Gala Dinner.

Relevant facts: You are a Member of Parliament. | You attended a Gala Dinner. | You paid for two tables at the Gala Dinner and incurred costs. | The two tables consisted of invited members of the public. | You used your electorate allowance to pay for this. | The event organizer strongly recommended your attendance. | The function included a sit down meal.