Belonging to The Qantas Club or Virgin Australia Lounge can provide business travellers with somewhere comfortable and convenient to relax, revitalise, or work productively whilst remaining inside the airport terminal. Exclusive amenities like deluxe armchair seating, hot showers with complimentary towels and toiletries, ‘free’ food and beverages, WiFi, workstations, and priority passenger services don’t come too cheaply, however. Any airport lounge club membership will cost hundreds of dollars per year for each traveller.
Many frequent flyers regard membership of an airport lounge club as vital for relieving some of the stress and work-disruption associated with business travel, and at Billings and Ellis we’re often asked the question: “Are airport lounge club membership fees tax deductible?”
The good news is that airport lounge club memberships can be wholly deductible for businesses with travelling employees. Even sole traders and employees may claim a deduction for their own membership fees in whole or part, subject to general rules summarised below.
100% tax deduction for businesses with travelling employees
According to a recent (2016) Australian Taxation Office determination, when an employer maintains airport lounge membership for business travel by employees, the annual membership fees can be 100% tax deductible for the employer.
Exemption from employee fringe benefit tax (FBT)
It doesn’t matter if the employee uses the airport lounge club membership for occasional holiday trips or social gatherings. As long as the main purpose of airport lounge club membership is to help facilitate the gaining or producing of assessable income for the employer, there is no need for the employee to declare any private use of their employer-provided membership as a fringe benefit.
Although airport lounges offer extensive hospitality and recreation (eg: food, drinks, entertainment) to club members and their guests, the ATO has determined that such offerings are incidental to the primary function of providing club members with business services and facilities, and more time-efficient processing when boarding flights.
Lounge club memberships for sole traders and employees
Sole traders may still claim an income tax deduction for airport lounge club membership, and so may employees who opt to maintain private airport lounge club membership when employers have taken a no-frills approach to staff travel arrangements.
In such instances, the traveller would need to apportion their use of the airport lounge club between business-related and personal purposes. For example, if an individual’s use of their airport lounge club membership could be validated as being 75% business or work-related, and 25% personal for holidays etc, a corresponding income tax deduction of up to 75% of the cost of the annual club membership may be claimed.
Specific advice on business-related travel expense deductions
As with all matters to do with taxation, it’s important not to make any rule-of-thumb assumptions but to obtain professional advice that’s specific to your business and personal circumstances.
If you’d like to know more about current rulings for business-related travel expenses and income tax deductions as an employer, sole trader, or employee, call Geoff Morris at Billings and Ellis today.