Many business owners spend thousands each year on meals, events, and staff functions without realising that much of it could legitimately reduce their tax bill. By understanding how entertainment expenses work, you can turn everyday spending on clients and staff into genuine tax deductions that help you pay less tax, make more money, and get ahead faster.
The problem is that most people either claim too much and risk an IRD issue, or claim too little and miss out on savings. Entertainment costs can feel like they sit in a grey area because they often have a private element (like the enjoyment of a meal) as well as a business purpose. Knowing when to claim 50% or 100% makes all the difference.
Entertainment expenses cover things like taking clients to lunch, hosting a Christmas party, sending a bottle of wine to a customer or supplier, or hiring a venue for a team event. The key is understanding the “business purpose” behind the spend.
If the purpose is partly private and partly business-related, you can usually claim 50%.
If the purpose is fully business-related (for example, promoting your business at a public event), you can often claim 100%.
For example:
Say you take a client out for lunch and the total bill is $200. Because both of you enjoyed a meal but the meeting had a clear business purpose, you can claim 50% of that cost (so $100 becomes a deductible expense). Over a year, if you have ten of those lunches, that’s a $1,000 deduction you might otherwise overlook.
Most business owners get confused between what’s 50% deductible and what’s 100% deductible. The difference can have a big impact on your bottom line or IRD attention in a risk review.
50% deductible examples
(part business, part personal)
These are situations where there’s a genuine business reason for the spending, but you or someone else also receives a personal benefit.
Client or supplier lunches and dinners: If you take a client to lunch to discuss business, you can claim 50% of the total bill, including your own meal.
Staff social events: Christmas parties, Friday night drinks, or a team dinner out are all 50% deductible because they provide entertainment and enjoyment as well as a staff benefit.
Gifts of food or drink: Sending a client a bottle of wine or a food hamper as a thank-you gift is 50% deductible. If the gift is something that can’t be consumed (like flowers or a book), it’s usually 100%.
Corporate boxes and event tickets: Hiring a corporate box at the rugby or providing tickets to a concert for clients or staff is 50% deductible, even if the event helps with networking.
Accommodation for entertainment purposes: If you provide a holiday home or other short-term accommodation for staff or clients as part of a reward or event, this also falls under the 50% rule.
100% deductible examples
(fully business-related)
These are costs where the private element is considered minimal or incidental, so you can claim the full amount.
Meals while travelling for business: When you’re away overnight for business, your meals are 100% deductible. But if you take a client out to dinner while you’re away, that meal becomes 50%.
Promotional or marketing events: If you’re providing food or drinks to the public at a trade show, open day, or promotional event, that’s 100% deductible because it’s clearly a business promotion.
Conferences and seminars: Morning teas, coffees, and lunches served during a business event are 100% deductible if the event runs for at least four hours.
Entertainment as part of your business: If your business provides entertainment for paying customers (for example, a restaurant or charter boat), those costs are 100% deductible because they’re directly tied to your income.
Overseas entertainment: Meals, events, or gifts provided outside New Zealand are fully deductible under New Zealand’s rules.
Charitable events: Providing entertainment to the public for a charity purpose, such as sponsoring a community event or fundraiser, is 100% deductible.
Summary
It’s worth taking the time to record each entertainment cost correctly. A $200 client lunch may seem minor, but across a year those small costs can add up to thousands. The difference between knowing the 50% and 100% rules is real money in your pocket, and it’s one of the easiest ways to reduce your tax bill legally.
Entertainment is part of doing business. It helps build relationships, motivate teams, and attract new opportunities. Understanding the rules means you can do it smarter, not smaller.
Contact Us
If you’re unsure what’s deductible or want help setting up a system to track expenses properly, talk to us. We’ll show you how to claim correctly, pay less tax, and put that money back into growing your business.
Contact us today to discuss on 07 827 9130 or email us. Our office is in Cambridge, NZ, but distance is no problem. We have many international and national clients.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
