From Flat Whites to Fat Refunds: The Cafe & Restaurant Owner's Tax Survival Guide

CORRECTION NOTICE, updated 24 August 2026 This episode was recorded from a script that contained several errors, and one of them is the largest dollar error found anywhere in our review of the back catalogue. The audio cannot be changed, so the corrections are marked inline through the transcript below and summarised here. Where the recording and this page disagree, this page is right. 1. THE GOODS-TAKEN-FROM-STOCK FIGURES ARE WRONG, AND THEY ARE THE WHOLE POINT OF THE EPISODE. The audio quotes a "Cafe or a Sandwich Shop" at $2,010 per adult and $1,005 per child. There is no such category in the determination, and neither figure appears in it for any year. The current amounts, from TD 2025/7 for the 2025-26 income year, are $4,420 per adult and $2,210 per child for an unlicensed restaurant or cafe, and $5,460 and $2,210 licensed. A cafe owner with a spouse and two school-age children should be adding $13,260 to assessable income, not the $6,030 the episode's figures produce. 2. THE DETERMINATION IS REISSUED EVERY YEAR. The episode cites TD 2023/7 throughout, and the figures it gives were wrong even for that year. Check the current determination before you lodge. 3. THE CHILD AMOUNT ONLY COVERS CHILDREN AGED 4 TO 16. Anyone over 16 counts at the adult rate, and children under 4 are not counted at all. The episode says "per child" with no age bands. 4. STAFF MEALS CANNOT BE BOTH EXEMPT FROM FBT AND INCOME TAX DEDUCTIBLE. The episode presents them as both. Where the food is entertainment, the on-premises exemption that removes the FBT removes the income tax deduction and the GST credits with it. Light refreshments are a different case, because they are not entertainment in the first place. 5. THE INSTANT ASSET WRITE-OFF IS CAPPED AT $20,000 PER ASSET. The episode never says so, in an episode whose own examples are $15,000 espresso machines, industrial refrigerators and "Goliath" ovens. It is also no longer "a political football": the $20,000 limit was made permanent from 1 July 2026. 6. THE "THREE GOLDEN RULES" QUOTED ARE THE RULES FOR EMPLOYEE WORK EXPENSES. A business deducts under a different test, and the practical difference is that private use is apportioned out rather than failing the claim outright. Verified against TD 2025/7 and TD 2023/7 in the ATO legal database, the ATO's instant asset write-off guidance (QC 61417) and its entertainment scenarios for business (QC 71139). If you have already lodged using the figures in the audio, the stock adjustment is one the ATO checks. Talk to us. ---------- Welcome, to the Podcast! Our newsletter made easy! Please note, this podcast features AI-generated voices for your hosts, Mia Taylor and Leo Baker, bringing you expert insights from owner, Ben De Rosa, at Aevum Accounting. Each week, we're here to help you confidently navigate the ins and outs of Australian tax – whether it's for your individual finances, or the complexities of your business. We'll cut through the jargon to give you strategies for compliance, smart planning, and that ultimate peace of mind. So, if you're looking to understand your obligations, maximize your financial position, or simply gain clarity on your money matters, you're in the right place. Let's get started with our review of the week! This week’s review comes from Boris Basque. He says: Ben de Rosa at Aevum Accounting has been our family and small business accountant for about six or seven years now, and I honestly cannot recommend him enough. He has supported us through every big milestone along the way, and I am really grateful for that. On top of that, Aevum’s modern systems make tax time so much easier. Everything is streamlined, there is way less back and forth, and it just makes the whole process feel painless. Such a great experience all round. Thank you for the amazing feedback Boris! We love hearing from our clients and a positive review gets our podcast started on the right foot. Mia, Hospitality is one of the toughest industries in Australia. The margins are thinner than a crepe, the hours are brutal, and the tax rules are as complex as a 12-course tasting menu. It really is the "pressure cooker" of business. Today, we’re talking to all our cafe owners, restaurateurs, and takeaway legends. We’re going to look at the deductions you might be missing, the reality of staff costs, and a very specific—and often overlooked—rule about what happens when you "eat your own profits." Literally. We’re diving into a document called Taxation Determination TD 2023/7. [CORRECTION: that determination has been superseded. It is reissued every year, and the current one is TD 2025/7 for the 2025-26 income year. Every figure quoted in this episode is wrong, including for the year the episode names.] It sounds dry, but if you’ve ever taken a bag of coffee home or fed your family from the restaurant kitchen, you need to hear this. But before we get to the snacks, let’s talk about the heavy lifting. The "Three Golden Rules" of tax deductions apply to a cafe just as much as a corporate office. [CORRECTION: not quite. Those three rules are the ATO's rules for employees claiming work expenses. A business deducts what it incurs in carrying on the business, and the differences are practical ones. Private use is apportioned out rather than sinking the whole claim, the record keeping obligations are the business ones, and plenty of things an employee could never claim are ordinary business costs.] First, you must have spent the money yourself and not been reimbursed. Second, it must directly relate to earning your income. And third, you must have a record. In a restaurant, those records usually start with the big-ticket items. We’re talking about the "Goliath" ovens, the $15,000 espresso machines, and the industrial refrigerators. These are "Capital Assets." Because they cost a significant amount and last for years, you generally don’t claim the whole cost in one hit. Instead, you "depreciate" them over their effective life. However, for our small business owners with a turnover under $10 million, you should check the current "Instant Asset Write-Off" thresholds. It’s been a bit of a political football lately, but when active, it allows you to claim the full cost of that new fridge immediately. [CORRECTION: two things. There is a limit, and it is $20,000 per asset. A $15,000 espresso machine is under it. A Goliath oven or an industrial refrigerator usually is not, and anything costing $20,000 or more goes into the small business pool instead, depreciating at 15 per cent in the first year and 30 per cent each year after that. The whole cost of the asset has to be under $20,000 before any of it qualifies, even if you only use it partly for business, and you then claim the business-use portion. And it is no longer a political football: the $20,000 limit was made permanent from 1 July 2026 by legislation that passed both Houses on 19 August 2026.] What about when that fridge breaks down? I’ve seen cafe owners trying to claim a full kitchen renovation as a "repair." That’s a classic trap, Leo. A Repair restores something to its original state—like fixing a leaking tap or replacing a broken heating element in an oven. That’s immediately deductible. An Improvement makes it better than it was—like ripping out the old lino and putting in high-end floor tiles. That’s a capital cost, and you have to claim it over time. So, fixing the coffee machine is a "Repair." Buying a second, better coffee machine is an "Improvement." Exactly. Now, let’s talk about the lifeblood of hospitality: Staff. Hospitality is a people business, but people are expensive. Beyond wages, you’ve got Superannuation, Workers' Comp, and sometimes Payroll Tax. And don't forget the "Staff Meal." If you provide meals to your employees on workdays, it’s generally a deductible business expense for you. However, you need to be careful with Fringe Benefits Tax (FBT). Typically, a simple meal provided on the business premises on a working day is exempt from FBT, but if you start taking the whole team out for lavish "bonding" dinners at a fancy steakhouse, the ATO starts looking for their cut. [CORRECTION: this passage offers you both halves of something you cannot have at once. Start by asking whether the food is entertainment. The ATO weighs why, what, when and where, and the first two matter most. Sustenance so staff can finish the shift, light food, no alcohol, on your premises, during work time, all point away from entertainment. A staff coffee and a sandwich on shift is not entertainment, so there is no FBT and you do keep the deduction. A proper sit-down meal, or anything with a social character, is entertainment, and here is the trap. Food provided to and eaten by current employees on your business premises on a working day is exempt from FBT. Because it is exempt it is not a fringe benefit, and because it is not a fringe benefit the income tax deduction and the GST credits go with it. In a cafe your premises are always the premises, so that exemption nearly always applies, which means the deduction nearly always does not. Where you genuinely do pay FBT on entertainment, the deduction comes back, and the FBT itself is deductible as well.] Record keeping is where most cafes crumble. Ben always says that a "shoebox of receipts" in a kitchen is just a fire hazard. With the high volume of small transactions in hospitality, you need a digital backbone. Integrating your Point of Sale (POS) system with your accounting software like Xero or MYOB is non-negotiable in 2026. It saves hours of manual entry. But even with the best tech, you have to manage Wastage and Spoilage. In a restaurant, your "inventory" literally rots if you don't sell it. You can claim the cost of goods sold, which includes the stuff that went off and had to be thrown out—but you must keep a wastage log. If the ATO sees you’re buying $5,000 worth of steak but only reporting $1,000 in sales, they’re going to ask who’s having the private party And that brings us to the "private party" rule—TD 2023/7. [CORRECTION: now TD 2025/7.] This is a fascinating bit of tax law. The ATO knows that if you own a sandwich shop, you’re probably eating a sandwich for lunch every day. And they know you’re probably taking a loaf of bread or a carton of milk home to the family. They call this "Goods taken from stock for private use." Legally, you aren't allowed to just claim the cost of that food as a business deduction if you’re the one eating it. Right. Normally, you’d have to keep a perfect record of every single olive or slice of ham you took home. But the ATO realizes how insane that would be for a busy business owner. So, they released this Determination, TD 2023/7, which provides "standard estimates." [CORRECTION: now TD 2025/7.] It’s basically a "shortcut" for cafe owners. Instead of counting every coffee bean, you just add a flat amount to your assessable income for the year. As an example, for the 2023-24 year, if you ran a Cafe or a Sandwich Shop, the ATO estimate is $2,010 per adult and $1,005 per child in your family. [CORRECTION: wrong on every count. There is no "Cafe or Sandwich Shop" category. The category is "restaurant or cafe", split into licensed and unlicensed, and the figures $2,010 and $1,005 appear nowhere in the determination for any year. For the current 2025-26 year, TD 2025/7 puts an unlicensed cafe or restaurant at $4,420 for each adult or child over 16, and $2,210 for each child aged 4 to 16. Children under 4 are not counted.] Wait, so if I’m a cafe owner with a wife and two kids, the ATO assumes we’ve eaten over $5,000 worth of cafe food? [CORRECTION: on the real figures it is $13,260, not "over $5,000". Two adults at $4,420 plus two school-age children at $2,210. The episode understates it by $7,230, and that understatement goes straight onto your taxable income when it is put right.] Yes. And if you run a Licensed Restaurant, that number jumps to $4,280 per adult. Why? Because they assume there’s probably some high-end wine or expensive cuts of meat involved. Takeaway food shops sit at $3,640 per adult. [CORRECTION: both of those figures are wrong too. For 2025-26 a licensed restaurant or cafe is $5,460 per adult and $2,210 per child aged 4 to 16, and a takeaway food shop is $4,680 and $2,340. Even for the 2023-24 year the episode names, the real figures were $5,160 and $4,290, not $4,280 and $3,640.] That seems like a lot, but if you think about a cafe owner having a $20 breakfast and two $5 coffees every day they work... that’s $150 a week. Over a year, that’s $7,800! So the ATO’s $2,010 estimate is actually a pretty good deal for the owner. [CORRECTION: the arithmetic holds but the conclusion does not, because the real figure is $4,420, not $2,010. It is a fair estimate rather than a bargain. It also cuts both ways. If your private use is genuinely lower than the schedule amount you can use the lower figure, provided you can show it. If it is significantly higher, you must use the actual amount.] It really is. It’s a "safe harbor." You use these figures, and the ATO won't argue with you about the specifics of your lunch. But remember, this only applies to the owner and their family. What about the "Pay it Forward" coffees? You know, when a regular comes in and the owner says, "This one's on the house"? That’s a marketing expense. As long as it’s done to build goodwill and attract future business, the cost of the milk and beans for that coffee remains a valid business deduction. Let’s move to the "Outdoor" deductions. In Perth, alfresco dining is everything. Can I claim the cost of the umbrellas, the outdoor heaters, and the barriers? Absolutely. Those are "tools of the trade." Even the cost of the local council permit for the alfresco area is a deductible business expense. and what about the "Home Office"? Most restaurant owners don't do their rosters and payroll in the middle of a noisy kitchen. They do it at home on a Sunday night. They do. And just like we discussed with engineers and real estate agents, you can claim the "Running Costs"—your electricity, your internet, and the depreciation on your home computer. But, as a restaurant owner, you generally can't claim "Occupancy Costs" like mortgage interest or rent, because your primary place of business is the restaurant itself. I also see a lot of cafe owners wearing branded aprons or specific "chef's checks" pants. Protective clothing is a big win here. Non-slip shoes, aprons, and chef's whites are all deductible. But a plain white t-shirt or black jeans you bought at the mall? Conventional clothing. Even if you only wear them in the kitchen, they aren't deductible. It has to be protective or a compulsory, branded uniform. Alright, let’s look at the "Naughty List" for hospitality. Number one: Fines. Health department fines, liquor licensing breaches, or even a parking ticket while you were at the wholesaler. They are not deductible. The ATO doesn't subsidize law-breaking. Number two: The "Owner's Wage" Trap. If you're a sole trader, you don't "pay yourself a wage." You just take "drawings" from the profit. You can't claim your own drawings as a business expense to lower your tax. Number three: Training for a new career. If you're a chef and you take a course in "Advanced Patisserie," that’s deductible because it improves your current skills. If you take a course in "Real Estate Sales" because you want to quit the kitchen, that is a private expense. Hospitality is high-risk for the ATO because there’s a lot of cash involved. The ATO’s data-matching looks at your lifestyle—the car you drive, the house you live in—and if it doesn't match the $30,000 profit you reported, they’re going to start asking about the cash till. Exactly. At Aevum Accounting, we’re all about Integrity and Trust. We help our hospitality clients set up systems that make compliance easy, so they can focus on the food and the service, not the fear of an audit. That’s a wrap on Episode 27! To all our hospitality legends—keep the coffee hot and the records clean. We hope today's discussion has provided you with valuable insights. Before we go, a quick but important reminder: The information shared today is for general informational purposes only and does not constitute specific tax or financial advice. Everyone's situation is unique, and tax laws—especially for small businesses—are complex. For personalized advice tailored to your cafe or restaurant, we always recommend consulting with a qualified professional. You can connect with Ben and the team at Aevum Accounting. Visit our website at aevumaccounting.com.au to learn more about our services and how we can support your business journey. Thank you for tuning in! If you enjoyed this, please subscribe and share it with your fellow business owners. Until next time, stay savvy, stay proactive, and keep building your financial future! From all of us at Aevum Accounting, goodbye for now!