Private ruling: Deductions - snacks
Date of advice: 3 November 2025
Published: 22 December 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the snacks you provided to the attendees able to be claimed as a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: You are a sole trader contracted to run music rehearsals. The after-hours rehearsals are conducted weekly. You are contracted to run music rehearsals and paid for this service. You also conduct one on one lessons. You are paid directly a fee per lesson or per rehearsal to attend. You only provide snacks at music rehearsals.

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

Reasons for decision: Summary: Section 8-1 of the ITAA 1997 allows a deduction for any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income; or it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. However, paragraph 8-1(2)(d) of the ITAA 1997 denies a deduction for an expense under section 8-1, to the extent that another section of the ITAA 1997 prevents you from deducting it. Section 32-5 of the ITAA 1997 provides that you cannot deduct the costs of providing entertainment under section 8-1 of the ITAA 1997. 'Entertainment' is defined in section 32-10 of the ITAA 1997, which states: 1. Entertainment means: a) Entertainment by way of food, drink or *recreation; or b) Accommodation or travel to do with providing entertainment by way of food, drink or *recreation. 2. You are taken to provide entertainment even if business discussions or transactions occur. The phrase 'entertainment by way of food, drink or recreation' is not further defined in the income tax legislation. Taxation Ruling TR 97/17 Income tax and fringe benefits tax: entertainment by way of food and drink relates to food and drink provided to employees. It contains principles that can be used to establish whether the provision of food and drink constitutes entertainment. The ATO takes the view that only the provision of food and drink that has an element of entertainment satisfies the definition, based on the ordinary meaning of entertainment, which in this context is 'amusement'. However, in most cases the mere provision of food and drink satisfies the 'entertainment' test. It is only a narrow category of cases where the mere provision of food and drink does not amount to 'entertainment' for the purposes of Division 32 of the ITAA 1997. To determine whether the provision of food or drink constitutes entertainment requires an objective analysis of all the circumstances surrounding that provision. Paragraph 23 of TR 97/17 provides the following relevant factors: a) Why is the food or drink being provided. This test is a 'purpose test'. For example, food or drink provided for the purposes of refreshment does not generally have the character of entertainment, whereas food or drink provided in a social situation where the purpose of the function is for employees to enjoy themselves has the character of entertainment. b) What food or drink is being provided. As noted above, morning and afternoon teas and light meals are generally not considered to constitute entertainment. However, as light meals become more elaborate, they take on more of the characteristics of entertainment. The reason for this is that the more elaborate a meal, the greater the likelihood that entertainment arises from the consumption of the meal. For example, when an employer provides morning or afternoon teas or light meals, that food or drink does not usually confer entertainment on the employee. By contrast, a three course meal provided to an employee during a working lunch has the characteristics of entertainment. The nature of the food itself confers entertainment on the employee. c) When is the food or drink being provided. Food or drink provided during work time, during overtime or while an employee is travelling is less likely to have the character of entertainment. This is because in the majority of these cases food provided is for a work-related purpose rather than an entertainment purpose. This, however, depends upon whether the entertainment of the recipient is the expected outcome of the provision of the food or drink. For example, a staff social function held during work time still has the character of entertainment. d) Where is the food or drink being provided. Food or drink provided on the employer's business premises or at the usual place of work of the employee is less likely to have the character of entertainment; refer to the reasons in (b) and (c) above. However, food or drink provided in a function room, hotel, restaurant, cafe, coffee shop or consumed with other forms of entertainment is more likely to have the character of entertainment. This is because the provision of the food or drink is less likely to have a work-related purpose. Paragraph 24 of TR 97/17 provides that no one factor will be determinative however, paragraphs (a) and (b) carry greater importance. Taxation Ruling IT 2675 Income tax and fringe benefits tax: entertainment - morning and afternoon teas; light meals; and in-house dining facilities discusses whether expenditure incurred by a taxpayer in providing morning and afternoon teas and light meals for the taxpayer, the taxpayer's employees and their associates, and visitors to the taxpayer's premises is: (i) 'in respect of the provision of entertainment' and therefore precluded by Section 32-5 of the ITAA 1997 from being an allowable income tax deduction under section 8-1 of the ITAA 1997 (ii) a fringe benefit under the Fringe Benefits Tax Assessment Act 1986 (FBTAA). It provides further information that under income tax law: 2. Providing morning or afternoon tea to employees (and associates of employees) on a working day either on the employer's premises or at a worksite of the employer is not the provision of entertainment. The cost of providing these refreshments is therefore not excluded as a deduction by section 32-5 of the ITAA 1997. In most cases, an income tax deduction is allowable under section 8-1 of the ITAA 1997. 3. However, it is necessary that the requirements of section 8-1 of the ITAA 1996 be met in each particular case for the cost of providing the morning or afternoon tea to be deductible. Broadly stated, the requirements are that the expenditure be incurred in the course of gaining assessable income (or carrying on business for this purpose) and that it not be of a capital, private or domestic nature. 4. If an employer (including a partner in a partnership) provides morning and afternoon tea to employees on a working day, and consumes morning or afternoon tea from the same source available to employees, the additional costs for the morning or afternoon tea consumed by the employer is not denied deductibility. 6. Morning and afternoon tea includes light refreshments such as tea, coffee, fruit drinks, cakes and biscuits, etc., but does not include alcohol. 7. Light meals are treated in the same way as morning and afternoon tea. It is not the provision of entertainment to provide sandwiches and other 'hand food', salads, or juice that are intended to, and can, be consumed on the taxpayer's premises or worksite. As 'light' meals become more elaborate, they take on more of the characteristics of entertainment. There is no particular point at which this will become obvious. Normal business practice will be the yardstick. | Detailed Reasoning - Application to circumstance: In this case, the provision of snacks during rehearsals do not have the character of entertainment. It is accepted that the provision of snacks has a connection to the production of your assessable income. Therefore, the expenses are deductible under section 8-1 of the ITAA 1997.