Can I claim the cost of my cup of coffee?
Can I claim the cost of my cup of coffee through my business? This is a question that we are commonly asked by our clients.
The answer is, it depends on the amount of fun that you are having while you drink the coffee. If your having too much fun, then its likely to be considered by the ATO to be entertainment, and you can’t claim GST or get a tax deduction on entertainment. If the purpose of the coffee is to talk business, then it is less fun and you can claim the GST back from the ATO and are likely to get a tax deduction.
So how do you know if you are having the right amount of fun while having a coffee?
You can consider the following:
Where are you having the coffee?
If at your business premises then not much fun, you can claim the GST. If at a cafe – minimal fun , so probably still claimable. If at a bar or a pub – FUN, you probably can’t claim the GST.
What time of day are you drinking the coffee?
If during business hours, not much fun, you can probably claim GST. If after hours or on the weekend – FUN, you are unlikely to be able to claim.
Who are you drinking the coffee with ?
Your bookkeeper ( fun?), your client or your tax advisor – not much fun and has a business purpose so you can claim the GST. If with your bestie, your partner or a complete stranger who you liked the look of – FUN, you probably can’t claim GST.
Are you having anything with the coffee?
If a small cake or healthy snack – not much fun, you can probably claim GST. If a dinner, 12 course degustation, birthday cake – FUN, you probably can’t claim.
So you can see that if you have a coffee and are not having too much fun ( and the purpose is business) then you should be able to claim the GST. My tip is to set up separate accounts in your accounting software to distinguish fun coffees ( Entertainment account ) from business coffees ( business meeting costs) . This will make it easier for you to select the right GST code every time. If you have any questions about where your expenses should go please ask your bookkeeper or tax agent. 😉
I think it’s time for a coffee…