On Wed 27.7.2016, the ATO issued a TD 2016/15 saying that  states that an employer taxpayer is entitled to a deduction under s 8-1 of the ITAA 1997 for annual fees incurred on an airport lounge membership for use by its employees, where that membership is provided because of the employment relationship. In coming to this conclusion that the general deduction is not disallowed as either entertainment expenditure under s32-5 of the ITAA 1997 or as expenses relating to a recreational club, made non-deductible under s26-45 of the same Act. The determination does not consider Fringe Benefits Tax aspects.

ATO ID WITHDRAWN: Following the release of this Determination, the ATO withdrew ATO ID 2004/957(Deductions and expenses: airport lounge membership). The ATO said the ID is withdrawn because the ATO view is considered in the Determination.

DATE OF EFFECT: Applies to income years commencing both before and after its date of issue.

[LTN 143, 27/7/16]

Extract from Tax Determination


6. Notwithstanding the position under section 8-1, a deduction for the membership fees is not allowable if section 26-45 of the ITAA 1997(recreational club expenses) or section 32-5 of the ITAA 1997(entertainment expenses) apply.

7. Airport lounge clubs provide business facilities (such as meeting rooms, individual workstations and Wi-Fi access) and services relating to the travel of their members (such as a streamlined checking in process). Although the clubs also provide some food, drink and recreation, the provision of a lounge membership is not properly characterised as a provision of ‘entertainment’. Similarly, airport lounge clubs could not properly be said to be clubs that are carried on ‘mainly to provide facilities … for drinking, dining, recreation or entertainment’. For these reasons:

  • the airport lounge membership fee is not an entertainment expense, and Division 32 of the ITAA 1997 does not apply to deny the deduction, and
  • the airport lounge club is not a recreational club, and section 26-45 of the ITAA 1997 does not apply to deny the deduction.

8. Accordingly, the annual airport lounge annual membership fees are deductible under section 8-1, except to the extent they are incurred in relation to gaining or producing exempt income or non-assessable non-exempt income.