Home · Guides

NZ Entertainment Expenses: The 50% Rule for Sole Traders

17 October 2026 · Guide · Not tax advice

Short answer: The IRD says there are three main types of business entertainment expense: 100% deductible and not liable for FBT, 50% deductible and not liable for FBT, and 100% deductible but liable for FBT (when employees receive it because of their work). For a self-employed person, "you can claim 50% of the total cost", for example 50% of a business lunch with clients. The IRD also says the cost of your own meals is usually a private expense for the self-employed.

50% deductible (IRD examples)

Entertainment that isn't completely business related, including entertainment away from work or outside usual working hours (a "significant private element"). The deduction is 50% even if you think the private element was more or less than 50%. Examples on the IRD page: corporate boxes at sports or cultural events; business use of a holiday home; hiring a boat with food and drink; food and drink at social events such as parties; gifts of food and drink enjoyed privately by the recipient (a bottle of wine for each customer); and "supporting expenses" such as hiring glasses and wait staff.

100% deductible and not liable for FBT (IRD examples)

Completely business-related entertainment, including: meals an employee buys while travelling on business (but 50% if with a business contact or a celebration); food and drink at a conference or course lasting at least 4 hours (unless mainly entertainment); light meals for senior managers consumed as part of their duties; entertainment that promotes your business if the public has the same access; branded freebies (not those given to employees or associates); entertainment provided to someone who will review it for publication; entertainment provided at a discount if your business regularly provides it at market prices; and entertainment enjoyed outside New Zealand.

Your own meals

The IRD's meal expenses page says that if you're self-employed (or run your business through a look-through company) you generally can't claim your own meals, apart from limited cases where you must work in a remote location or at unusual hours and pay extra: only the extra over your normal meal costs. A business meal with clients counts as entertainment (50%).

GST goes with the income tax outcome

For GST, the IRD says you generally claim only 50% of entertainment, so you make a GST adjustment for the part you can't claim, once a year. The timing depends on whether you have a tax agent. Without an agent, it goes in the GST return that covers the earlier of the date your income tax return is due or filed. If you have a tax agent, the timing differs: with no extension of time, the adjustment goes in the GST return covering the earlier of the date your income tax return is filed or 31 March after the return's due date; with an extension, it goes in the return covering the filing date. See GST registration and filing. The IRD page we read was last updated April 28, 2021.

Made-up example

Say a client lunch costs $230 including GST. Using the 3/23 fraction the GST is $30, so the 50% rule means you can claim half: $15 of GST on a GST return, with a $15 adjustment, and a 50% income tax deduction. This is our own arithmetic, not an IRD example. If you are GST-registered, the deduction works on the $200 excluding GST (so $100); if you are not GST-registered, the deduction is 50% of the full $230 ($115). Keep the receipt and note the client's name and the business purpose (our suggestion, not IRD text).

Related

Home office · vehicle expenses · records

FAQ

Is a coffee with a client 50%? The IRD says that when you are self-employed and have entertainment expenses including meals you can claim 50% of the total cost. Your own coffee on your own is generally private. The IRD pages do not address small items separately.

What if I'm not GST-registered? There is no GST to claim or adjust; the 50% income tax limit applies to the full amount you paid.

Does FBT apply to me as a sole trader? FBT concerns benefits for employees; the page doesn't address a sole trader's own spending.

What we could not verify

• IR268 (Entertainment expenses guide) and the Income Tax Act sections DD 1 and DD 2: seen only as search excerpts; the detailed lists weren't read.
• The IRD "Treatment of meal expenses" fact sheet on Tax Technical: not read.
• Whether the rules changed for 2026-27: the pages show no recent review date.
• How to calculate the GST adjustment in practice (return boxes): not read.
• The tax agent timing rules are taken from the IRD GST adjustments page last updated 28 April 2021; later changes were not checked.
• FBT details for employees: only the three-category summary was read.

Open the tax calendar and estimator