Quick answer
New Zealand uses a 50% rule rather than a full block. Entertainment with a private element, such as a client lunch or a staff party, is 50% deductible, and your GST claim is limited to the same 50%. Entertainment that is completely business related, and most meals while travelling on business, are 100% deductible. A single GST entertainment adjustment squares up the difference at year end.
Are business meals tax deductible in New Zealand?
In New Zealand most meals and entertainment fall under the 50% entertainment rule. Where food, drink, or an event has a private or social element, only half the cost is deductible for income tax. That covers client lunches, staff parties, drinks, and similar hospitality. Entertainment that is completely business related is fully deductible, and so are most meals bought while travelling on business.
The rule has a GST consequence: because only 50% of the cost is deductible, only 50% of the GST is claimable. Most businesses claim the full GST through the year and then make one entertainment adjustment in the GST return that covers their income tax balance date. See the New Zealand expense rules for how this interacts with FBT.
How much can you claim?
| Situation | Income tax | GST |
|---|---|---|
| Client lunch, staff party, drinks, off-site function | 50% deductible | 50% claimable |
| Corporate box, holiday home, pleasure craft | 50% deductible | 50% claimable |
| Meal while travelling on business (alone) | 100% deductible | Fully claimable |
| Travel meal with a business contact or a celebration | 50% deductible | 50% claimable |
| Morning tea or light refreshments at work | 100% deductible | Fully claimable |
Worked example. You take a client to lunch for $230 including $30 GST. The lunch is entertainment with a private element, so $115 is deductible and only $15 of the GST is recoverable. Separately, you buy a $25 lunch on your own while travelling interstate for work; that is 100% deductible and the GST is fully claimable.
Record-keeping requirements
Keep the taxable supply information for each meal, note who attended and the business reason, and flag at capture whether it is 50% entertainment or a fully deductible travel or workplace meal. The note is what supports a 100% travel-meal claim against the default 50% treatment. Business records must be kept for seven years.
How to claim, step by step
- At capture, classify the meal as 50% entertainment or a 100% deductible travel or workplace meal.
- Code 50% entertainment items to your entertainment account.
- Claim the GST during the year as normal.
- At your income tax balance date, make the entertainment adjustment so only 50% of the GST on limited items is retained.
- Attach the taxable supply information and the attendee note to each transaction.
- Keep records for seven years.
Common mistakes
- Claiming the full deduction on a client lunch, when it is limited to 50%.
- Forgetting the GST entertainment adjustment, so you over-claim GST on 50% items.
- Treating every travel meal as 50%, when a solo business travel meal is usually 100% deductible.
- Treating workplace morning tea as 50% entertainment, when light refreshments at work are generally fully deductible.
- Losing the taxable supply information, which is needed to claim GST above $200.
Software that helps
The 50% versus 100% call has to be made at capture, because it cannot be reconstructed from a bank line later.
- Hnry applies the entertainment treatment for sole traders automatically.
- ExpenseFlow reads the receipt, applies the correct GST treatment, and flags entertainment-style meals that are limited to 50% rather than a fully deductible travel or workplace meal, then syncs the coded transaction to Xero.
- Dext prompts for an attendee note as receipts are scanned.
FAQ
See the answered questions above for the 50% rule, the GST adjustment, travel meals, staff parties, and what is always limited to 50%.