To help determine whether expenditure is 50% deductible or 100% deductible, look for a reasonable amount of personal benefit from the entertainment.

If this exists, it is likely the expense will be 50% deductible. Entertainment is not deductible at all unless it is incurred for business purposes.

Record Keeping IRD expects you to keep a record of:-

• The date the expenses were incurred
• The names of the people entertained [a good idea is to record the name on the transaction receipt]
• The business they represent
• The position they hold
• The reasons for the entertainment Expenditure which is 100% deductible should be kept separate from 50% deductible expenditure; the following lists are not comprehensive, for further details refer to the IRD guide IR268.

50% deductible costs

1. Food and drink will be 50% if there is a personal enjoyment element
2. A Christmas party for staff
3. If you take a customer out to lunch.
4. Corporate Boxes [including temporary seating, seats in a stadium]
5. Holiday accommodation 6. Boats and pleasure craft

100% deductible costs

1. Food and drink while away travelling on business providing it does not have the personal enjoyment elements. You can take overseas customers to restaurants and claim 100%.
2. If you go to a conference, the cost of food and drink is 100% deductible provided the course lasts for more than 4 hours [excludes time for a meal break].
3. Meal allowances
4. Morning and afternoon teas.

GST

The GST content of the non deductible portion of the entertainment cost cannot be claimed.

FBT

Any gift to an employee worth $300 or more in any quarter and fringe benefits to all staff more than $22,500 for four quarters are subject to FBT. A quarter is 1 January to 31 March etc in every year.

DISCLAIMER: The information contained in this document is for information purposes only and should not be relied upon as a substitute for professional advice. For further information and advice please contact Whaley Harris Durney Chartered Accountants.