Having a drink or a meal with a business contact is even better when you know how to claim back entertainment expenses. The individual amounts might not seem like much to begin with but they add up quickly and can substantially reduce your tax bill over the year. Putting in place a simple system for claiming entertainment expenses can make the process feel effortless.
Entertainment can mean food and drink, social events, trips, accommodation, privileges, musical, sporting or theatrical events, and freebies such as samples or gifts.
Very specific rules apply to different categories of entertainment expenses. However, many of the rules are for large companies and don’t relate to most people who are self-employed. For example, not many self-employed people have a corporate box, serve meals to board members, or host overseas conferences.
So, to make things simple here is this practical guide specifically for self-employed kiwis – based on the official New Zealand tax guides (used by accountants) and the latest information from IRD – to help you claim entertainment expenses with confidence.
Which entertainment expenses can you claim?
Below are the common entertainment expenses you can claim.
If you’re unsure what to claim, a good rule of thumb is if it’s helping you earn your income it’s usually claimable.
Most entertainment expenses are 50% claimable while a few exceptions are fully claimable.
50% claimable
The entertainment expenses below are all 50% claimable unless stated otherwise because they have a significant private element. Even if you think that the private element was more or less than 50% of the expense, you can still only claim 50% of the expense.
Food or drink with a client – Food or drink with a current or potential client, staff, subcontractors or suppliers. This could be out at a bar/restaurant/cafe or at your place of work such as an office, temporary work site or your home if that where you work from.
Social events – Food and drink you provide for social events, such as a work party or Friday drinks. The event can be on or off your business premises. Includes supporting expenses such as hire of wine glasses and wait staff for a party.
Gifts of food and drink – Gifts of food and drink that benefit your business and are enjoyed privately by the person who receives them (for example, if you give a bottle of wine to a client when a project is completed)
Freebies – You can only deduct 50% of the cost of freebies you give employees or people associated with you. But you can claim 100% of the cost of freebies promoting your business.
100% claimable
The entertainment expenses below are all 100% claimable unless stated otherwise.
Gifts other than food or drink – Gifts for employees or clients other than food or drink. You can’t give gifts of cash; any gifts for employees must have a maximum value of $300 per quarter per employee. Staff discounts are considered a gift.
Reviewers – The cost of providing entertainment to a person to review your business for a paper, magazine, social media or other media, is 100% claimable.
Samples – The cost of providing samples for advertising or promotional purposes is 100% claimable.
Entertainment for charity – Entertainment you supply to the general public for charitable purposes. Such as donating food to a Christmas party in a children’s hospital.
Entertainment expenses that are less common
Corporate boxes – The cost of a corporate box, marquee or tent at a recreational event is 50% claimable. This also applies to the cost of tickets and any food and drink provided.
Holiday accommodation – Business use of a holiday home, timeshare apartment or similar venue is 50% claimable. This also applies to any food or drink provided at the property.
Morning and afternoon teas – Morning and afternoon teas in an executive dining facility or at a conference are 100% claimable.
Conferences – The cost of food and drink at a conference or business course you host, which continues for four hours or more, is fully claimable.
Public promotions and trade display – Entertainment provided by a business as part of a function open to the public, or at trade displays to advertise the business, is fully claimable. This includes the costs of cutlery hire, food and drink, venue hire and equipment.
Sponsorship – The cost of sponsoring entertainment, such as local sports team, is 100% claimable where the sponsorship is mainly for promotion or advertising to the public.
Boats – The cost of hiring a recreational boat to entertain business contacts is 50% claimable. Including any food or drink provided.
Offshore entertainment – Entertainment outside New Zealand, such as hosting a conference in Australia, is 100% claimable.
