Private ruling: Meal expense deductions
Date of advice: 15 March 2019
Published: May 2019
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you entitled to a deduction for the cost of your meals when you take clients out for lunch? | A1: No.

Relevant facts and circumstances: You are self-employed. You have been operating since 20XX. You have previous experience in the industry. You started your own business as you wanted to give a better experience to your clients. As part of your role you are often out with your clients when they are eating lunch. In order to model or engage in regular interactions with your clients, you eat lunch at the same time as them. This often means that you have to purchase your lunch from the same place as your clients. You are also often unable to eat at a different time as your clients. You have noticed that these interactions have assisted your clients in having meaningful outings.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1

Reasons for decision: Summary: You can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income except where the loss or outgoing is capital or private in nature (section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)). Expenditure incurred on the daily necessities of life, such as food and drink, is generally a private expense and is not incurred in gaining or producing assessable income. The issue of the deductibility of meals was considered by the Full Federal Court in FC of T v. Cooper (1991) 21 ATR 1616; 91 ATC 4396 where Hill J stated: Food and drink are ordinarily private matters, and the essential character of expenditure on food and drink will ordinarily be private rather than having the character of a working or business expense. However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those illustrated of work-related entertainment or expenditure incurred while away from home. The reference to 'expenditure incurred while away from home' is a reference to the situation where a taxpayer must travel away from home overnight for the purposes of their employment. Where a taxpayer is required to sleep away from home for work purposes the cost of meals may be deductible. In your case, you are eating lunch with your clients as a matter of convenience. The essential character of expenditure on meals is generally private in nature and your circumstances are not considered sufficient to change that character. Also, the Commissioner is unable to provide an exemption where one is not allowable by law. In this case there is no exemption allowable by law. As such, the cost of your meals is not incurred in gaining or producing your assessable income. Consequently, the expenses you incur on meals are not deductible under section 8-1 of the ITAA 1997.