GAL 
   
 

Entertainment Expenses

 
Grange Associates Ltd - 7 March 2012

If you provide entertainment for your staff or clients, your business entertainment expenditure will fall into one of the following categories:

  • FBT Applies & 100% Deductible
  • 50% Deductible
  • 100% Deductible

If you do have entertainment expenditure that is subject to FBT, there is an annual exemption of $1,200 per employee or $22,500 per employer per annum.  So you may not have an FBT liability in some circumstances.

The following table is intended to give you an idea of the deductibility and FBT liability of different entertainment expenses.


Expense 

FBT Applies & 100% Deductible

50% Deductible 

100% Deductible

Meals while travelling on business (excluding meals for business contacts)     

 

Meals at a party or social function while travelling on business  

 

 

Meals with business contacts while travelling on business   

 

 
Food and drink at conferences/staff training or business course (over four hours in duration)    

Food and drink at conferences/staff training or business course (under four hours in duration)  

 

 
Meal allowances e.g tax free meal allowance for an employee working overtime    

 

Light lunch provided for a lunchtime business meeting of senior staff on premises    

 

Morning and afternoon tea     

 

Incidental entertainment as part of trade displays and promotions open to the public     

 

Incidental entertainment as part of trade displays and promotions not open to the public  

 

 
Off-shore entertainment (in the course of normal business duties)    

 

Off-shore entertainment (outside the course of normal business duties) 

 

 

 

Monetary sponsorship (principally for promotion or advertising to the public)    

 

Monetary sponsorship (where entertainment is more readily available to employees and business contacts than general public)    

 

 
Samples for advertising or promotion purposes to people not employed or associated with the business    

 

Charitable entertainment (e.g donating food to a children's hospital Christmas party)     

 

Providing entertainment for a reviewer (e.g a meal provided for a journalist who will review it in their newspaper)     

 

Taxable entertainment allowances (e.g a taxable allowance provided to an employee to entertain clients)    

 

Tax-free entertainment allowance  

 

 

For licensed premises operators:

  • Happy Hour
  • Two for one meals
  • Free drinks
   

 



Restaurant vouchers for employee incentive scheme

 

 

 

Paying for staff entry into "Round the Bays" and supplying a BBQ and drinks afterwards   

 

 
Staff Christmas parties/lunches   

 

 
Subsidised drinks for staff at work premises  

 

 
Bottle of wine given as a gift to staff 

 

   
Bottle of wine given as a gift to customers   

 

 
Corporate boxes, marquees or tents and similar exclusive areas at sporting, cultural or other recreational activities away from business premises   

 

 
Providing staff with tickets to events outside employment duties e.g tickets to a rugby game 

 

   
Entertainment (in the general sense) provided to employees to enjoy outside employment duties and at their own discretion 

 

   
Holiday accommodation enjoyed at employee's discretion

 

 

 
Accommodation in a New Zealand holiday home, time-share apartment or similar, excluding on business, but not at employee's discretion

 

 

 
Accommodation in an overseas holiday home, time-share apartment or similar, excluding on business, but not at employee's discretion     

 

Pleasure-craft, e.g a corporate yacht   

 

 

Food and drink provided or consumed:

  • incidentally in any corporate box, marquee, tent, exclusive area, holiday home/time-share apartment (not incidental to business activities) or pleasure-craft e.g alcohol provided in a corporate box 
  • away from your business premises e.g business lunch at a restaurant
  • on the your business premises at a party, reception, celebration, meal or other similar social function
  • at any event or function, on or away from your business premises for the purpose of staff morale or goodwill e.g Friday night "shout" at the pub
  • in an area of your business premises reserved for use at the time by senior staff and not open to other staff (e.g Executive Dining Room)
 

 


 



 

 


 

 

It can become confusing when trying to determine whether entertainment falls into the FBT regime.  For reference, entertainment expenses are treated as fringe benefits only if:

  • the employee can choose when to enjoy the benefit, or
  • they are enjoyed outside New Zealand, and
  • they are not consumed or enjoyed in the course of, or as a necessary consequence of, employment


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All information is correct at the date of article publication. Please note we provide the information as a service only. Accordingly, the contents are not intended as a substitute for specific professional advice and should not be relied upon for that purpose.   


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