In a move aimed at bolstering small businesses and the hospitality sector, the Coalition has unveiled a proposal to introduce a tax deduction of up to $20,000 annually for business-related meal and entertainment expenses. This initiative is designed to support businesses with turnovers under $10 million and is set to run as a two-year trial. 

Key Features of the Proposal:

·         Eligible Deductions: Businesses can claim tax deductions for expenses related to meals and entertainment, including tickets to sports events, movies, and golf outings. 

·         Exclusions: Expenses on alcohol and venues such as bars and strip clubs are not deductible under this scheme. 

·         Fringe Benefits Tax (FBT) Exemption: The proposed deductions will be exempt from FBT, simplifying the tax process for small businesses. 

 Implications for Small and Medium Enterprises (SMEs):

If enacted, this policy could significantly impact SMEs by:

• Reducing Taxable Income: Allowing deductions for specific entertainment expenses can lower taxable income, resulting in potential tax savings.
• Enhancing Employee and Client Engagement: Facilitating tax-deductible meals and entertainment can improve relationships with clients and boost employee morale.
• Stimulating the Hospitality Sector: Increased spending on business-related entertainment is expected to provide a much-needed boost to hospitality venues.

Industry Response:

The proposal has garnered support from various industry bodies:

• Council of Small Business Organisations Australia (COSBOA): Welcomed the policy, emphasizing its potential to drive new business and aid in client retention.
• Hospitality NT: Praised the initiative, highlighting that it offers fair tax relief and assists businesses in rewarding their employees without additional tax burdens.

Considerations and Next Steps:

While the proposal aims to support small businesses, it’s essential to consider:

• Policy Approval: The proposal is subject to legislative approval and may undergo changes during the process.
• Consultation with Accountants: SMEs should engage with financial advisors to understand how to maximize benefits and ensure compliance if the policy is enacted.

Staying informed on policy developments is crucial for SMEs to adapt and plan effectively.