Let’s be honest — when it comes to business entertainment expenses, it’s easy to get lost in the weeds. Is that client lunch deductible? What about the staff party at the end of the year? And don’t even get me started on that corporate box you splurged on for the rugby final.
If you’ve ever wondered what’s tax-deductible and what’s just wishful thinking, you’re in the right place. Between work-related entertainment costs, promotional expenses, and the occasional holiday accommodation, understanding the rules can save you serious money (and stress) when filing your tax return.
This article breaks down everything — from GST adjustments and FBT (Fringe Benefit Tax) to reimbursements and expense reports. We’ll cover IRD guidelines, when to keep your receipts, and how to handle corporate hospitality costs like a pro. You’ll learn how to separate business meals from personal splurges, and when a travel expense becomes a trap.
Bottom line: knowing your entertainment policy and what qualifies under client entertainment deductions can mean the difference between a smart claim and a red flag. Let’s get into it.
Expenses 100% Deductible
Some entertainment expenses are fully deductible — no splitting hairs, no guesswork. If the expense is completely business-related and doesn’t have a private element, you’re good to go.
Think meals while travelling for work, light meals during a board meeting, or coffee at a trade display. These are all part of the job, not perks — and that’s what makes them fully deductible.
Just remember: it’s about context. That nice meal? If it’s with a client, it’s 50%. If it’s you grabbing a sandwich while away for work, it’s 100%. See the difference?
Here’s a quick table to keep things clear:
| Expense Type | Deductibility | Notes |
|---|---|---|
| Meals while travelling on business | 100% | Must be work-related (not social or with a client) |
| Food at conferences (4+ hours) | 100% | Conference must not be mainly for entertainment |
| Light meals during internal meetings | 100% | For example, sandwiches at a board meeting |
| Public promotional events (equal access) | 100% | Must be open to public and not just clients/staff |
| Freebies for product reviews | 100% | E.g., giving a food critic a free meal for review |
| Entertainment overseas | 100% | Applies only if consumed outside New Zealand |
| Charity event expenses (open to public) | 100% | Donations of food/services for community or charitable events |
| Regular discounted business offerings | 100% | E.g., half-price meals offered weekly to all customers |
Keep it simple: if the main purpose is business, and there’s no personal enjoyment in the mix, you’re likely in 100% territory.
Expenses 50% Deductible
Now here’s where it gets tricky. Some expenses are part-business, part-pleasure — and that’s where the 50/50 rule kicks in.
Basically, if there’s a private benefit involved (even just a slice of it), Inland Revenue says you can only claim 50%. It doesn’t matter if it felt mostly business — the rule stays the same. Fair? Maybe not. But it’s the game we play.
So what falls under this? Think staff parties, client lunches, corporate box events, or even that fancy gift basket with a bottle of wine. You’re giving something nice, but it’s not purely business — and the taxman knows it.
Here’s a cheat sheet:
| Expense Type | Deductibility | Notes |
|---|---|---|
| Client lunches / dinners | 50% | Even if business-related, they include a private benefit |
| Staff parties (e.g., Christmas party) | 50% | Whether onsite or offsite, same rule applies |
| Corporate box tickets / hospitality | 50% | Includes food, drink, and ticket costs |
| Holiday accommodation for work events | 50% | Unless it’s clearly secondary to work activities |
| Gifts of food or drink | 50% | Non-food items may be fully deductible |
| Recreational boats / event trips | 50% | Applies even if used for business planning or bonding |
| Food/drink in exclusive staff areas | 50% | E.g., executive dining room meals |
| Offsite meals (with no public access) | 50% | Doesn’t apply to trade displays open to the public |
| Supporting expenses (e.g. glasses, staff) | 50% | If used during 50% deductible events |
Moral of the story? Keep good records and know when the line between business and pleasure gets blurry. A little entertainment policy in place never hurts either.
GST and FBT Adjustments for Business Entertainment Expenses
Alright, so you’ve figured out what’s 100% or 50% deductible — now comes the fun part: adjusting for GST and watching out for FBT (Fringe Benefit Tax).
Let’s break it down.
GST Adjustments
If you’re GST-registered, you can usually claim the full GST on your entertainment expenses up front — even on the 50% deductible ones. But once the financial year ends, you need to make an annual GST adjustment to reflect the non-deductible portion.
How to do it:
- Find the non-deductible entertainment amount (usually 50% of total).
- Multiply it by 15% (the GST rate).
- Add that figure to Box 9 in your GST return.
Example:
You spent $300 on a staff party (GST included).
→ 50% is deductible = $150 is non-deductible
→ $150 × 15% = $22.50 GST adjustment
→ Report this in Box 9 of your return.
Easy? Kind of.
FBT (Fringe Benefit Tax)
Now let’s talk about perks. If your team is getting extra benefits — like gift cards, restaurant vouchers, or a weekend away — these can trigger FBT.
When FBT applies:
- The employee can choose how or when to enjoy the benefit.
- The benefit is not a direct result of their job duties.
- It’s a reward, not a business necessity.
When it doesn’t apply:
If the entertainment is already 50% deductible, FBT generally doesn’t apply unless those special conditions are met.
Bottom line: watch those thank-you gifts and team rewards — they might come with a tax surprise.
Final Thoughts and Pro Tips
Business entertainment expenses can feel like a maze — one where the walls are made of receipts, FBT rules, and GST adjustments. But once you know the basics — what’s 100% deductible, what’s only 50%, and how to stay onside with the IRD guidelines — it becomes a lot more manageable.
The secret? Keep it simple:
- Track everything in real time.
- Hold onto your expense reports and receipts.
- Separate business meals from personal ones.
- Don’t ignore staff parties, client lunches, or those “generous” perks — they add up.
And if you’re still scratching your head over what you can actually claim — don’t worry. That’s what we’re here for.
At BH Accounting, we help business owners like you stay compliant while making the most of your tax deductions. Whether it’s reviewing your entertainment policy, handling FBT, or filing your tax return — we’ve got your back.
Need help figuring it all out? Reach out to us — we’ll match you with the best professional for your needs.
Disclaimer
This article is for information only—not legal, financial, or tax advice. Every business is different, and rules change, so don’t make major decisions based on what you read here. If you’re unsure, talk to a professional—it’s cheaper than fixing a costly mistake later.