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Is Food and Drink 100% Deductible?

Danny Pritchard
Taking a client out for a coffee? Shouting the team beers? We’ve broken down exactly what you can and can’t claim for ‘entertainment’ when it comes to food and drink expenses.

Spoiler alert: you’ll want to consume takeaway coffees and brownies on your business premises!

Different categories have different rules and it can all get a little confusing. There’s even sub categories within the ‘entertainment’ category that each have a very unique set of rules. When it comes to those work perks like coffees and beers, there’s a curvy hand-drawn line between what’s 100% deductible and what’s only 50%.

Think business, think big. When it comes to claiming, it should be clear whether expenses are private or business-related (any expenditure intended to help your business earn income is considered business-related). If it’s likely to increase your revenue, it’s more than likely deductible (at least to some extent).

Consumption at the office

When it comes to shouting the office food and drink on your business premises, you can only deduct 50% of the cost. This rule applies whether it’s staff, clients, or even guests from outside the business.

Unfortunately yes, that means those ‘after work beers’ on a Friday afternoon are not fully deductible. We do have good news though! When it comes to your coffee and light refreshments, consider it 100% deductible.

For example: Bring on Tuesday Ltd puts on a Christmas party for its employees. It holds the party at work. The company can claim 50% of the costs.

Takeaway coffees for the team?

You’ll be glad to hear that those takeaway flat whites you bought from your favourite cafe for your employees (or clients) to drink at the office are usually 100% deductible (assuming your team are performing their normal employment duties). Even Sally’s fancy oat milk Vanilla Matcha Latte is deductible when it’s brought back to the office.

If you and your team decide to sit and enjoy the coffees at the cafe, it will only be 50% deductible.

Business meetings offsite

Food and drink enjoyed away from the four walls you call an office are only 50% deductible. Even when it’s for clients, prospective clients, or your employees.

Just like in this scenario: Sally invites a client to a business lunch at a local cafe and pays the bill, which comes to $190. She deducts 50% of the cost ($95) in her income tax return.

What about when you’re travelling?

Ahh, different kettle of fish. If you and/or your team are travelling for business the cost is 100% deductible. HOWEVER, this will not be the case if one of the below applies:

  • The trip is mainly for the purpose of enjoying entertainment, for example, a team bonding trip
  • The meal or function involves an existing or potential business contact as a guest
  • A celebration meal, party, reception or similar occasion where you will not be working

Let’s say you're doing a business presentation at an event in Queenstown. You’ll likely be able to claim all of your meals as business expenses, provided you are there solely for business. However, if you go out for dinner with a client while you’re in Queenstown, that meal will only be 50% deductible.

Overseas expenses? We’ve got good news!

Any entertainment enjoyed or consumed outside of New Zealand is 100% deductible if it’s primarily a business trip. For example: you’re away on business in Aussie at a 3-day conference but take a half-day off to explore Sydney before you fly home. You decide to check out the museum and get lunch - this would likely be 100% deductible.

The takeaway?

Well, takeaway! But really, we’d love to say it’s a simple one blanket rule for all, but it’s not as clear cut as that - we told you the line was curvy. Even the takeaways have rules! To simplify, we’ve stripped it right back:

  • When it’s a takeaway coffee or light nibble consumed at the office, it’s 100%
  • When travelling it’s 100%, but only as long as you’re away solely for business and aren’t expensing any client entertainment
  • Any offsite entertainment is 50%
  • If it’s an office shout, it’s 50%

Still overwhelmed and feeling like you could be claiming more than you have previously? Book an obligation-free chat with BOM.

Danny Pritchard

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