The proposal would provide small businesses with a tax deduction for meal and entertainment expenses that have a connection with business activity and income, including dining and entertainment provided to clients, vendors and employees.

The proposal also provides a Fringe Benefits Tax (FBT) exemption for any meal and entertainment expenses incurred in relation to employees that is claimed as a deduction and would run for 2 years, 2025-26 and 2026-27.

Eligibility for the tax deduction would be limited to small businesses with turnover up to $10 million, with a maximum tax deduction of $20,000 for meal and entertainment expenses (excluding alcohol), for two years.

For businesses to claim the deduction there would need to be a nexus with business activity and income – e.g. dining/entertainment of clients, vendors, employees. The tax deduction is not able to be claimed for expenses that are of a personal/family nature.

The proposal would start on 1 July 2025.