Unfortunately, there’s no such thing as a free lunch.
Wining and dining clients, gifting a bottle of wine at Christmas, or taking your team out for a celebratory lunch — these are common costs for many businesses. But not all entertainment expenses are treated equally when it comes to tax.
Here’s a clear breakdown to help you make the most of what you can claim, while avoiding any surprises at tax time.
First things first – what counts as entertainment?
Whether entertainment is deductible depends on a few key details: who was there, where it happened, why you did it, and how it was provided.
To keep things simple, most entertainment expenses fall into four buckets:
Private entertaining = Not deductible
These are those moments in life that don’t have a direct link to your income. Lovely? Absolutely. Tax deductible? Afraid not.
For example:
- Friday night drinks at the pub with your mates
- A bottle of wine with dinner at home
- Lunch at your desk between meetings
If it’s personal or has no real connection to business, you’ll need to foot the bill yourself.
The ‘wine and dine’ side of business = 50% deductible
Activity that’s a blend of business and personal enjoyment? You can claim half the cost. This is where the majority of business-related entertainment lands.
Think of:
- Taking clients out for lunch or a coffee
- A thank-you dinner for the team
- Christmas hampers or wine gifted to a client
- Hosting clients in a corporate box or hiring a boat for a business outing
You can also include related costs like food, drinks, fuel, or maintenance.
The common theme? Food or drink enjoyed offsite, shared with others. If there’s a social element to it, 50 per cent is usually your number.
But, when is a free lunch actually on the table? Here’s what’s 100% deductible.
There are some situations where you can claim the full cost, but depending on the context, Fringe Benefit Tax may still apply.
These include:
- Meals while travelling for work (you’re away from home and not entertaining anyone)
- Light refreshments at a team meeting
- Food or drink at a training session or seminar
- Events open to the public where no one gets special treatment
- Entertainment that happens outside of New Zealand
In these cases, the benefit is either purely work-related or not targeted at individuals — which makes it fully deductible.
Fully deductible but may trigger FBT:
- Gift vouchers, event tickets, or other perks that staff can use at their discretion
- Shouts or experiences given as a reward or incentive
In these cases, Fringe Benefit Tax may apply because the benefit sits with the employee. If you’re unsure whether an expense triggers FBT — or if you’re eligible for a de minimis exemption* — it’s best to double-check.
Entertainment expenses are a regular part of business life. Whether you’re building client relationships or celebrating with your team, these gestures matter. And with a little planning, you can make sure you’re getting the best outcome come tax time.
If you’re ever in doubt, reach out to one of the team for help.
*De minimis exemption relates to unclassified fringe benefits i.e., not a vehicle, low interest loan, discounted or free goods / services, some insurance contributions. If unclassified benefits are below $300 per quarter, or $1,200 per year no FBT needs to be returned on these when provided to staff.
