Claiming Entertainment Expenses in NZ

Entertainment expenses are an essential part of your business’s operations. They can boost employee morale and enhance client and customer relationships. There are some tax advantages regarding when claiming entertainment expenses in NZ, but it’s essential to understand what qualifies as 100% deductible and what's subject to a partial deduction.

What Are Entertainment Expenses?

Entertainment expenses cover costs for employee and client activities, including food, drinks, social events, and accommodation. A gift that is food and beverage related will also be considered entertainment.

Different categories of expenses have unique rules, affecting what can be claimed for tax purposes.

What Entertainment Expenses Can You Claim?

In general, expenses that help generate business income are deductible. Here’s a breakdown of claimable entertainment expenses:

50% Deductible Expenses:

Corporate boxes
Off-site meals and drinks with clients or employees
Social events like office parties
Gifts that are food and beverage related
Annual trips and accommodations

100% Deductible Entertainment Expenses:

Conference food and drink
Employee travel meals
Office morning and afternoon tea
Promotional gifts (non-food and drink items)

Gifts to employees can be tricky—amounts under $300 per quarter per employee are 100% deductible. Go over $300 and there are Fringe Benefit issues - see below. Food and drink gifts are only 50% deductible.

Entertainment Costs & GST Implications

GST is only claimable on the deductible portion of entertainment expenses. For items that are only 50% claimable, we usually do your entertainment adjustment at year end. Here we add back 50% of the cost and GST.

If you would like to know more about GST, see our guide: GST for New Zealand Businesses: A Comprehensive Guide

Entertainment Costs & FBT (Fringe Benefit Tax) Implications

Some 100% deductible expenses given to employees may be liable for FBT if provided as rewards. Examples include gift vouchers or paid getaways for performance.

If you would like to know more about FBT, see our article: Fringe Benefit Tax Explained: What You Need to Know

Record Keeping for Entertainment Expenses

To claim entertainment expenses, keep detailed records, including:

Date of expense
Name and positions of people entertained
Reason for entertainment

These records make it easier to identify which expenses are 100% or 50% deductible. A simple note in your accounting system like Xero, will suffice.

To find out more about accounting systems for NZ small businesses, see our articles:

Key Benefits of Accounting Software

Is Xero Right for My Business?

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