Posted on 01 Dec 2021
If you're spending money on entertainment for work purposes, whether it's with clients or staff, you need to know the rules around claiming entertainment expenses. Expenses will either be a) fully deductible (100%) and not liable for FBT or b) 50% deductible and not liable for FBT or c) 100% deductible and liable for FBT. For this purpose, the IRD provides specific rules regarding different types of entertainment expenses which we can help you to navigate.? As a guide, we've listed the examples from the IRD below. We recommend speaking to one of our team if you need further clarification on this. Entertainment expenses will be 100% deductible and not liable for FBT if they're completely business related.
This includes:
Examples include:
Expenses that are 100% deductible and liable for FBT: Includes those that 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.
There are some entertainment expenses that are not deductible. Where the expense is not related to generating income for your business, it will not be deductible. For instance, it would not be deductible if you take your family (who don't work with you in your business) out for dinner to thank them for being patient while you worked long hours and pay for this using the business credit card.
You can claim the full GST portion on all entertainment expenses you have incurred throughout the year. However, if the entertainment expenses are only 50% deductible you will need to make an adjustment once a year for the 50% non-deductible portion, or alternatively claim the correct portion throughout the year as the expenses are incurred.
If employees can enjoy an entertainment benefit at their discretion outside their employment duties, this benefit will be subject to FBT. Any entertainment expenses that come under the 50% deductibility rules are not liable for FBT. Again, if you're not sure or need more advice around entertainment expenses check in with us first. NB: Please note this advice relates to employees (including shareholder employees), if you are self-employed then some of these expenses are not deductible? There are no FBT rules for self employed persons as these relate to employees.
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