Recently a few new clients called to understand what type of entertainment expenses are deductible for tax purpose and what's not. Technically, expenses incurred in earning assessable income are deductible for tax purposes. Most business related expenses are fully deductible. If the expense doesn’t help your business earn gross income, it’s private and you can’t claim it as a tax deduction. A principle, easy enough to get, right? Well, it turns out that its not so simple in relation to some expenses. Given that its relatively easy to extend an argument in favour of a position one is taking, the IRD has specified some rules in relation to some of expenses - entertainment is one of them.

This article discusses, with some examples what type of entertainment is deductible for tax purposes and what type is not. We have used examples of Christmas parties below as some shops & cafes have already started to get setup for Christmas parties!
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Deductibility also impacts GST & FBT so its important that one understands this carefully.

It becomes a little trickier when there’s an element of private enjoyment. You might think that the firm’s Christmas party for clients is a business related expense and should be fully deductible because it’s promoting your business, products or services.

Generally speaking, if there’s an element of private enjoyment, the expenses (in addition to the food and drink) associated with events where you entertain clients and/or staff will only be 50% deductible. For instance, this would include the hire of crockery, glasses, waiting staff and music.

Accordingly, if your clients OR employees OR anyone associated with the business have a greater opportunity to enjoy the entertainment than the general public, you can only deduct 50% of the costs.

There are exceptions of course!

Entertainment supplied for charity is 100% deductible. For instance if you throw a Christmas party for the children’s ward at the local hospital, this is fully deductible.

Entertainment enjoyed outside New Zealand is 100% deductible. If you take the team to Fiji or Cook Islands for Christmas (lucky them!), all costs (net of amounts contributed by staff if any) will be fully deductible.

Recently a few of our clients' staff were appointed to the board of companies acquired by the clients. We were approached by the staff to advise on their rights, duties and obligations as directors.
This article endeavours to discuss the essentials of being an effective director, whether you have been appointed by your employer to the board of one of its subsidiaries or you have accepted the role of the director in a company, even if you are one of its shareholders. We will discuss what the law sets out as your legal rights, duties and obligations and what they mean on a practical day-to-day basis.
Being a director is more than just a title - they need to be both risk-managers and responsible risk-takers to enable companies to grow and survive. Directors are the representative of the company and shareholder, and answer to them. Even if you are also the main shareholder, as a director you’ll have legal responsibilities to actively monitor the management of your company and may face serious penalties if things go wrong.
Although the article addresses directly the directors, the practical day-to-day conduct applies equally to trustees.
 ...So before you take up a directorship