Meal expenses – Income tax and GST

It can come as a surprise to find out that the income tax and GST treatment of meal
expenses for self-employed people differs from that of meal allowances paid to
employees. And it’s different again under the entertainment expenditure rules.

If you’re self-employed you usually cannot deduct meal expenses as they are
deemed private or domestic expenses, although depending on the circumstances,
there may be some exceptions.

However, meal expenses are deductible when it’s a straightforward reimbursement
allowance to an employee for out-of-pocket work-related expenses.

The GST treatment follows the income tax treatment. If you cannot deduct
expenses for income tax purposes, you cannot deduct GST input tax on the
expense. Where an income tax deduction is allowable for meal expenses, and you
are GST registered, you can deduct the input tax.

Inland Revenue entertainment expenses rules do not distinguish between types of
business entities but on the type of entertainment and the connection between the
expense and business income. If you are self-employed and incur meal expenses
that are classed as entertainment expenditure, you can deduct 50% of the cost,
including the cost of your meal.

Ask us if you’re not sure whether meal expenses incurred in the line of business are
tax deductible.

For more information, download the guide

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