Alcohol at Business Premises: Why It’s Not Deductible (Even If It’s Promotional)

Many businesses offer alcoholic drinks at their premises to foster goodwill, celebrate milestones, or promote their brand. While the intent may be commercial, the tax treatment is governed by a stricter lens—one that often classifies such expenses as entertainment, rendering them non-deductible and ineligible for GST credits.

The Tax Reality: Entertainment Overrides Intent

Under Australian tax law, specifically Division 32 of the Income Tax Assessment Act 1997, entertainment expenses are generally excluded from deductions. The ATO’s Taxation Ruling TR 97/17 reinforces this, stating:

“The provision of alcohol is generally regarded as entertainment, even if consumed on business premises, and even if the purpose is promotional.”

This means that even if the drinks are served during a product launch, networking event, or client presentation, the presence of alcohol typically triggers the entertainment classification.

Relevant Example from TR 97/17

One of the clearest illustrations appears in paragraph 32 of the ruling:

Example: A business hosts a product launch at its office and serves wine and beer to attendees. Despite being held on business premises and having a promotional purpose, the alcohol is considered entertainment. The expense is not deductible, and no GST credit is available.

This example highlights the ATO’s position: location and business intent do not override the entertainment classification when alcohol is involved.

What You Can Claim

To stay within deductible territory, consider:

• Providing light refreshments like tea, coffee, and snacks during meetings

• Hosting training sessions or seminars with non-alcoholic catering

• Ensuring the event’s primary purpose is business-related, not social

Strategic Insight

While offering a drink may seem like a minor gesture, it can have disproportionate tax consequences. Businesses should weigh the branding benefits against the loss of deductibility and GST recovery. If in doubt, scenario modelling can help clarify the financial impact.

Would you like a companion checklist for evaluating entertainment expenses, or a version of this formatted for your business? We can also help you build a scenario model comparing deductible vs non-deductible event structures.