I thought it would be topical this month to comment on what is tax deductible for entertainment due to staff Christmas functions and celebrations happening this month.
Here is a summary of what you can deduct and a few examples. If you want to know more detail on this, the link to the IRD website is:
Entertainment expenses will be 100% deductible and not liable for FBT if they’re completely business related.
- meals an employee buys while travelling on business
- food and drink provided at a conference, education course or similar event that lasts at least 4 hours
- light meals provided in a dining room for senior managers and consumed as part of their duties
- entertainment that promotes your business
- entertainment that is only a secondary part of either a function that is open to the public, or any trade display
- freebies promoting your business
- entertainment provided to someone who’s going to review it for publication (such as giving a free meal to food critics)
- entertainment provided at a discount, if your business regularly provides entertainment at market prices (for example, offering half-price meals at your restaurant)
- entertainment enjoyed outside of New Zealand.
Entertainment expenses will be 50% deductible and not liable for FBT if they are not completely business related. This includes entertainment that is away from work or out of usual working hours, so it has a 'significant private element'. The expense will be 50% deductible even if you think the private element was more or less than 50%.
Examples of this include:
- entertainment at sports or cultural events (for example, a corporate box)
- business use of a holiday home
- hiring a boat, and providing food and drink to people on it
- food and drink you provide for social events or in an area set aside for senior employees
- gifts of food and drink that benefit your business and are enjoyed privately by the person who receives them
- 'supporting expenses' for other entertainment that’s 50% deductible, such as hire of wine glasses and wait staff for a party
100% deductible & liable for FBT
Entertainment expenses will be 100% deductible and liable for FBT if they are received by employees because of the work they do. Examples of this include rewards for good performance, such as a restaurant gift voucher or weekend away.
Lastly, over your summer break you may be reflecting on what your plans are for next year. Jot things down,and be ready to create some budgets and do some planning around those ideas to get you started. Thoughts and dreams become reality so choose the good ones and take action.
Our team would like to wish you all a Merry Xmas and a safe and happy holiday season.