Claiming Food and Drink expenses

Claiming Food & Drink expenses (if you’re self-employed)

A recent statement from IRD has clarified their stance on the claiming of Food and Drink as a deductible expense in your business, especially if you are self-employed.

There are three aspects to the way Food and/or Drink is treated for tax purposes and these are:

  • Entertainment Expenses – Where you are entertaining clients there is a 50% deductibility rule. Look for our blog on Entertainment Expenses, we will be sending this out soon.
  • FBT – certain expenses may be treated as Fringe Benefits and would come under the FBT rules.
  • Food and Drink purchased by a business owner for themselves as a self-employed person or a shareholder employee. (This does not cover payments to non-shareholder/employees for meal reimbursements).

This last one is the one on which we have recently received an updated statement from IRD and is the one that will affect business owners who claim for food and drink.

In the first instance, food is considered a necessity of life and a private cost therefore not deductible.

Under certain business circumstances, it was considered that these costs could be claimed such as:

  • Travelling for work – away from home and/or unable to access somewhere to prepare food.
  • Overnight travel for work, cost of eating out.
  • Purchasing coffees, lunches etc during the day while out visiting clients.

The following examples are in the recent statement by IRD and clarify their take on these expenses.  These examples confirm how “picky” IRD is becoming on these issues, if you think you can claim these expenses it may be best to check with us first.

IRDs Examples

Rob is a self-employed engineer –most of his work is in Auckland where he lives and he has a small workshop in North Shore, where he stores parts, the office has tea & coffee facilities and a microwave. His spouse helps with admin.  He travels around Auckland & different cities in NZ for work.

  1. Rob travels around South Auckland all day at different sites –he’s away from the office and buys coffee, a pie and cronut. This is not deductible.  He had to eat -he could have taken a thermos and cut lunch –his choice to incur cost.
  2. All day in Rotorua buys coffees and lunch – home at 9.00pm. Had dinner in Rotorua rather than waiting till he gets home – This is not deductible.
  3. Overnight in Hawkes Bay, breakfast, lunch and dinner at a restaurant – This is not deductible – This is an extra cost but he chose that as opposed to staying in a place with a microwave to heat baked beans on toast. He was supposed to make lunch and take a thermos from the hotel so coffee is a choice.
  4. Overnight in a remote spot, no self-catering or supermarket, so he has to eat in the restaurant – this is an extra cost no choice –only excess is claimable. He has to deduct the normal meal cost – he estimates at $15. Goes overboard on top shelf alcohol that would no doubt be a choice and non deductible. Our comment “You are expected to separate out the usual cost of a meal at home from the cost of the restaurant meal and only claim the difference.”

If you need more guidance around this, please contact one of our team to discuss further. We’re here to help.

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