Where there is sufficient connection between entertainment expenditure and your business, these expenses should be deductible for income tax and claimable for GST purposes. However, the income tax deduction for expenses that fall into the specified entertainment regime is limited to 50% of the value of this expense. Entertainment expenditure that falls outside of the specified entertainment regime may be subject to the FBT regime.
Below is a list of the different types of entertainment expenditure and the income tax treatment.
- Staff Christmas functions held on either the employer’s premises, or elsewhere, including the costs of waiters, music and crockery hireage, etc 50% deductible
- Friday night drinks 50% deductible
- Morning and afternoon teas provided on the employer’s premises 100 % deductible
- Light working lunches provided to employees on the employer’s premises 100% deductible
- Business lunch with a business contact at a Restaurant 50% deductible
- Food and drink consumed while on business travel when clients or potential clients are present 50% deductible
- Food and drink consumed while on business travel alone or with other employees of the organisation 100% deductible
- Entertainment for business purposes outside New Zealand 100% deductible
- Corporate Boxes/Pleasure craft 50% deductible
Please note: Although some of the expenditure above may be 100% deductible, the benefit provided to staff may be subject to FBT.