Entertainment Expenses – Income Tax and GST

The rules and exemptions for entertainment expenses can be complex. If you’re not sure, check with us on common types of expenses and their tax treatment.

As a general rule, if you provide entertainment for your team or clients, some of your business entertainment expenses are tax deductible.

Some examples of fully deductible entertainment expenses are food and drink:

• While travelling on business
• At promotions open to the public
• At certain conferences

Some other entertainment expenses are only 50% deductible, for example:

• Taking a client out for a meal to discuss business
• Staff drinks in the office
• Staff Christmas party

If your entertainment expenses are only 50% deductible, you need to make an adjustment once a year on your GST return to repay the GST on the 50% non-deductible portion.

If employees (including shareholder-employees) enjoy entertainment benefits at their discretion and outside their normal employment duties, then these will be subject to FBT.

As the rules and exemptions are complex, click the link below for more detail on some of the more common types of expenses and their treatment. As always, for specific advice, be sure to contact us.

Download the guide to entertainment expenses.

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