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Coalition's Proposal Simplifies Tax Deductions for Business Meals
Coalition's Proposal Simplifies Tax Deductions for Business Meals
The Coalition has introduced a proposal to alleviate tax burdens on small business owners, which could notably benefit financial planning practices.
Under current tax regulations, expenses related to meals and entertainment are generally non-deductible unless fringe benefits tax (FBT) is paid at a substantial rate.
This has discouraged professionals from organizing off-site meals for employees and clients.
The proposed changes aim to streamline this process by allowing small businesses, defined as those with a turnover up to $10 million, to claim meal expenses up to $20,000 as deductions without incurring fringe benefits tax.
Currently, providing meals off-site involves complexities related to FBT, which is applied at the highest marginal rate of 47%, making it financially burdensome for employers. The new proposal seeks to treat meal expenses in the same manner as other business-related costs, thus simplifying tax filing procedures. For example, if a company spends $1,000 on an off-site staff meal, it would not face FBT, and it could claim back the GST on the expenditure and also deduct the full amount on its income tax return.
The changes are expected to provide a significant advantage to small businesses, particularly in the financial sector, by making meal expenses more manageable and fostering a more engaging workplace environment. Perigee Advisers' principal, Lisa Greig, highlighted the existing complexities of FBT, noting that it acts as a deterrent rather than an effective revenue-generating measure. She emphasized the proposal’s potential to alleviate common tax-related frustrations for businesses, especially those lacking in-house financial expertise.
This initiative could particularly impact financial planning practices by reducing their compliance burden and encouraging them to utilize meal-related benefits for both employees and clients without financial penalties. By eliminating the need to navigate intricate FBT regulations, practices could focus more on engaging staff and building client relationships.
As the proposal awaits further consideration and potential implementation at the next federal election, business owners, especially in the financial planning space, are advised to maintain accurate records of meal-related expenses to ensure they can maximize potential deductions if the changes are enacted. The proposal represents a step towards simplifying the tax landscape for small businesses and could lead to further legislative adjustments in favor of business-friendly tax policies.
Published:Wednesday, 26th Feb 2025
Source: Paige Estritori
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