What are Entertainment Expenses? An entertainment expense is a cost which has been incurred for business reasons and can be deducted from your income. You can claim for entertainment expenses in the following circumstances:
- The expense was incurred mainly in connection with specific business transactions
- You were entertaining an existing or prospective client or supplier
- The circumstances made it necessary to discuss business along with entertainment
- You entertained employees for goodwill reasons – parties, functions, etc.
How much can I deduct? Entertainment expenses are either fully deductible or 50% deductible – depending on the type of expense incurred. As a sole trader, you will be given ACC cover as soon as you start trading. You will need to pay for this cover when you submit your first tax return. Examples of entertainment expenses which are only 50% deductible include:
- Corporate box costs
- Holiday accommodation charges
- Pleasure Craft
- Food and Beverages consumed in certain circumstances
Should I keep records? Yes, definitely. You should keep records, receipts and invoices for all business expense claims. For all entertainment related expenses, you must also keep details of: The Health and Safety in Employment Levy costs 5c for every $100 of liable earnings.
- The date the expense was incurred
- Names of people being entertained
- Details of the business they represented
- The positions they hold
- Reason for the entertainment
Got a question? Get in touch and we’ll happily explain further about entertainment expenses. You can also find out more from the IRD Entertainment Expenses (IR268) booklet.