Claiming food as a business expense

Whether you can claim food and beverages as a tax deduction typically depends on who incurred the expense and the context surrounding it.

For someone operating as a sole trader or partnership, food and drinks are typically not a deductible business expense, even if you're staying at a hotel for a night or more. Meals are considered a personal expense as you still need to eat and drink regardless of whether you're at work or not.

However, there are some exceptions:

If an employee or shareholder-employee's signed employment contract has meal-related provisions, these costs may be a deductible business expense as it's considered an employee expense.

However, there are strings attached to this.

Meal costs incurred by an owner of an LTC are not deductible as expenses look-through to the owners, so are deemed a personal expense. However, the cost of a meal reimbursement or allowance for a standard employee (i.e. non-owner) may be deductible if the cost meets the criteria outlined above. Entertainment rules may apply depending on the context in which the cost occurred.

Light snacks such as tea, coffee, biscuits and other simple snacks provided to employees (or shareholder-employees) in a business premises during normal work hours are 100% tax deductible. If these are provided to employees working offsite (replacing what would normally be provided), this is also 100% deductible.

Full meals like a lunch or dinner are not covered under this rule, nor can you claim refreshments as a business expense if you're self-employed (sorry, your daily tea or coffee in your home office is considered a personal expense).

Light meals such as sandwiches and fruit, served during a work meeting (e.g. a staff or board meeting) are also 100% deductible unless there is an entertainment/social aspect like a birthday celebration, which makes it only 50% deductible.

If an employer reimburses or pays for a meal for an employee or shareholder-employee working overtime, the cost may be 100% deductible and typically exempt from PAYE and FBT. However, if the meal is provided offsite, it may trigger different rules (e.g. entertainment or FBT).

The meals must be part of legitimate overtime work. Shareholder-employees cannot just buy dinner after a long day and consider it an overtime meal allowance.

If a conference or training runs for 4 or more hours (excluding breaks), meals provided are 100% deductible. However, if there is an entertainment element, the costs incurred will only be 50% deductible.

If the promotional event is open to the general public, the cost of providing food and drinks is fully deductible (e.g. serving coffee at a trade show). If the event is invite-only, it's considered entertainment and only 50% deductible.

Food and drinks donated to a charity event are 100% deductible, provided it's not done as sponsorship, marketing, or for any other reason that benefits the business. It must be genuinely charitable.

Ben is a sole trader who travels between clients and doesn't get home until 8pm. He buys lunch, takeaway coffee and dinner during his travels. These are not claimable as they're considered personal in nature.

Kat travels to a rural part of the country where the only accommodation is a place with a restaurant. There is no supermarket nearby and no option to self-cater. Kat has no other option but to dine in the restaurant for dinner, which incurs costs higher than she would have if she was having dinner at home. If the meal cost $35 and a home-cooked meal would normally cost $20, she can claim the $15 difference.

Bob is required by his employer to travel out of town for a couple of days. Based on his employment contract, he's entitled to be reimbursed for meals. Since this is an employee-related expense, it's considered a business expense for the employer. If the travel includes entertainment (e.g. lunch with a client), only 50% is deductible.

Stacey is a working owner of an LTC and has to travel to another city for a week for business purposes. Her meal costs are not claimable as they're considered a personal expense and she would still need to eat regardless of whether she's in another city or at home.

Sally wants to grow the business and decides to take a potential client out for lunch to build the relationship. The lunch costs are 50% claimable under entertainment rules.

XYZ Limited keeps a supply of instant coffee, tea and milk in their staff kitchen for their team of 10 employees. This is fully deductible as a light refreshment.

Jerry owns his own tech business and stocks up on some coffee, milk and biscuits for his daily work breaks. This is not deductible under light refreshment rules as they're treated as a personal expense like his other weekly groceries.

You can only claim GST on the business portion of the expense. If you need to make a 50% non-deductible adjustment on any meal expenses, then the same adjustment is needed for GST.

In some scenarios, FBT may apply on meals provided directly by an employer to their employees as it's considered a type of personal benefit. This would typically be if a food or meal voucher was given to an employee. Regular or excessive meal allowances/reimbursement may also attract FBT.

Food and beverage expenses are much more likely to fall under entertainment or not be a deductible business expense at all.

While the deductibility of food and beverage costs varies depending on business structure, who incurred the cost and the context, keeping clear records is essential. To avoid issues with Inland Revenue, always retain detailed receipts, document the business purpose of the meal, and consult with an accountant if you are ever unsure if it's deductible.