A brief guide to claimable entertainment expenses

In September 2021, Inland Revenue released an Interpretation Statement on the treatment of meal expenses. We don’t suggest you read it, but you can check out our short summary here.

The general rule about expenses you can claim anything that is related to the production of your income. But there are some curly bits in the entertainment area as there is often a blurred line between personal and business expenses.

  • If it’s purely personal (taking Mum out to dinner), you can’t claim it
  • If it’s any of the following, you can claim 50%:
    • A corporate box
    • Cost of renting a boat for entertaining customers or employees
    • Gifts to clients
    • Food and drink at your office for a social event like a party or function
    • Off-site food and drink such as taking a client, a supplier, or employees to lunch
  • You can claim 100% of the following:
    • Food and drink you provided at a conference for others
    • Morning and afternoon tea for your team
    • Freebies to promote your services as long as you only give them to clients (not your team or people you know personally)
  • Gifts to employees and clients
    • As long as you don’t provide any single employee with a gift worth more than $300* each quarter (March, June, September, and December), the costs are 100% deductible. However…if the gift is food and/or drink, then only 50% can be claimed.
    • If you’re gifting vouchers, GST cannot be claimed on the purchase price. The 50% rule applies here too – if the vouchers relate to food/drink, you can only claim 50% as a business expense.
    • For gifts to clients, the rules are exactly the same as above, except there is no set dollar value.

* This is set by the IRD. Anything more than $300 per quarter is captured by the FBT regime (Fringe Benefit Tax). You really don’t want to go there…

You don’t need to make any adjustments at your end for GST or splitting out non-deductible entertainment. If you’re a Beany client, we’ll take care of this for you.

Contact [email protected] at any time if you want to check a particular item for a tax claim.

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