Chartered Accountants Auckland

Business coffeeThe “copy, tee, meel” email has to be one of my all time favourites and if you haven’t seen it, then Googling ‘tanjooberrymutts‘ will help you translate those three words into ‘coffee, tea, milk’.  Unfortunately, translating the laws around business food and drink isn’t quite as simple and, to put it bluntly, very little is actually fully deductible (as you’ll see below):

Fully deductible food & drink

  1. Coffee, Tea, Milk and Biscuits for tea breaks at work.
  2. Food or drink at a promotional event which is open to the public.
  3. Light working lunches, for select employees, in a senior meeting room for example.
  4. Staff meals when they’ve worked 2+ hours overtime (& employment contract includes a clause).
  5. Meals at courses where training is 4+ hours (excluding breakfast, lunch or dinner breaks!)
  6. Meals while travelling overseas or out of town on business (but if you’re paying for someone else, even a client, then it’s only half deductible!)

50% deductible food & drink (Entertainment)

You can generally only claim 50% of all other business food and drink, which we feel is completely outdated and unfair.  Why should hard working business people be punished in everyday business situations like these?

  1. Cafe lunch with a client or a potential client.
  2. Taking staff, clients or suppliers out  for coffee, muffins and snacks.
  3. Having client or staff drinks at work (or if you take them out).
  4. Giving clients gifts of food or drink (including vouchers and hampers)
  5. Business dinner at a restaurant with a client, employee, or a fellow shareholder/director.
  6. Staff Christmas Parties.

To make things even trickier, you’ll claim 100% in your GST Returns and later repay 3/23rds of half-the-GST-exclusive-amount (not half the GST) when your Chartered Accountant files your Income Tax Return.  Plus it’s essential you record who you were with and the purpose of all entertainment.  And if you’re thinking of giving employees Food & Drink then things get even messier with Fringe Benefit Tax potentially kicking in.

Even the Inland Revenue’s answer was ridiculously complex when they were recently asked about claiming Coffee & Muffins so surely that means it’s time for a law change where the answer becomes quite simply “yes, in the course of business”.

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