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The general rule with expenses is you can claim anything related to the production of your income but there are some curly bits in the entertainment area.

Learn what entertainment expenses you can claim. Discover the difference between 50% and 100% deductible costs, plus GST and FBT rules.

Entertainment expenses in NZ

Taking clients out for coffee or hosting a team social event is great for business, but navigating the tax rules around those entertainment expenses can be a headache. Knowing exactly what is and isn't tax-deductible is crucial for your bottom line. We've put together this guide to break down exactly what you can claim, the GST and FBT implications you need to watch out for, and the records you need to keep.

What’s classified as an entertainment expense?

Anything you’ve paid for that is for your employees or customers entertainment is considered an entertainment expense. That can mean food and drinks, social events, corporate boxes, trips, Christmas functions and more.

Within this, there are specific rules applied to different categories of entertainment expenses. For example, some expenses are fully deductible with no FBT implications, but some are not. There are situations where entertainment expenses are 100% deductible but still liable for FBT.

The general rule for business expenses is that you can claim anything that helps you to generate business income. If it’s purely personal, you can’t claim it. But there are some curly bits in the entertainment area as there is often a blurred line between personal and business.

Food and drink you provide at a conference for others (specific rules apply - refer to the IRD guide at the end of this section)

Meals an employee buys while travelling on business (unless it’s a meal with an existing or potential business contract, then it’s only 50% claimable)

Entertainment you supply to the general public for charitable purposes e.g. donating food to a Christmas party at a children’s hospital.

Entertainment enjoyed or consumed outside NZ (the waters around NZ are considered part of New Zealand).

If there’s a personal element related to the entertainment expense, then the cost is likely to be 50% deductible. Examples include:

Entertainment at sports events e.g. a corporate box

Cost of renting a boat for entertaining customers or employees

Food and drink at your office for a social event e.g. a party or function

Off-site food and drink such as taking a client, supplier, or employees to lunch 

Gifts of food and drink that benefit your business and are enjoyed privately by the person who receives them e.g. giving a client a bottle of wine or a supermarket gift card

‘Supporting expenses’ for entertainment such as the hire of wine glasses and wait staff for a work party.

For a more exhaustive list of examples, visit the IRD’s Entertainment Expenses page.

You can only claim GST on deductible entertainment expenses. This means where the expense is 100% deductible you can claim the full portion of GST. Meanwhile, for 50% deductible expenses you can only claim GST on the deductible porition. In this scenario, you’ll usually just claim the full amount during the year and your accountant will make an annual adjustment when they prepare year-end accounts to payback the GST on the non-deductible position.

Fringe Benefit Tax on entertainment expenses is not very common, but it could happen. An entertainment expense could be 100% deductible and liable for FBT if they are received by employees because of the work they do. For example, rewards for good performance, such as a restaurant gift voucher or a weekend away are considered an entertainment expense and would attract Fringe Benefit Tax.

In order to make an entertainment expense claim you need to keep invoices or receipts. As required by the IRD, you also need to keep records of the following information:​

The date entertainment expenses were incurred

Keeping these records will help your accountant accurately calculate the entertainment expenses you’re eligible to claim against your taxes. It also helps with identifying which expenses are 100% deductible and which are only 50% deductible.

To wrap up, making the most of entertainment expense claims comes down to good habits and understanding the IRD’s rules. Make it a standard process to snap photos of your receipts and log the ‘who, what and why’ immediately after each entertainment-related event and when in doubt, reach out to your accountant if you’re unsure on the deductibility of a particular expense.

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Expenses

You may want to show your appreciation by giving employees or clients gifts during the festive season. However, there are some FBT and tax rules you need to follow. 

Gifting to Employees & Clients: FBT and Tax-Deductibility Rules

Many businesses like to acknowledge their employees or key clients with gifts, especially at the end of the year. However, it's worth understanding how the IRD treats different types of gifts, especially when it comes to tax-deductibility and Fringe Benefit Tax (FBT). The rules vary based on who receives the gift and the nature of the item, so planning ahead helps you avoid unexpected tax obligations or missed deductions.

Gifts to employees are considered unclassified fringe benefits. These fall under the de-minimis exemption, meaning you may be exempt from paying FBT as long as the value of the gifts you provide employees is less than $300 (GST inclusive) per employee per financial quarter. The total value of all unclassified benefits across your entire team must also not exceed $22,500 (GST inclusive) within the financial year.

If you go over either limit, FBT applies to the full value of the gifts, not just the amount above the limit. Go over $300 for one employee, and FBT is payable on all the gifts that employee received that quarter. Go over the $22,500 team limit, and FBT is payable on all unclassified benefits you provided.

Wondering if you can give yourself a gift from the business? If you’re an employee (or a shareholder-employee) receiving PAYE-paid wages from the business, you can. Otherwise, no.​

Since April 2025, you can choose how the gift cards you give employees are taxed.

Through FBT: gift cards count towards the FBT-exempt limits mentioned above

Through PAYE: you add the value of the gift card to the employee's pay and deduct PAYE the same as you would for their wages

While FBT determines whether an employee gift is a taxable benefit, the type of gift determines what percentage of the cost is tax-deductible for income tax.

The golden rule: if the gift consists of food and/or drinks, you can only claim 50% as a tax deduction, while non-food/drink gifts are 100% deductible. 

However, if your gift is a mix of items (e.g. a gift basket) and it consists of some foods/drinks but not all, the food and drink items are 50% tax deductible, and the rest of the non-food/drink items are 100% deductible.

If you purchase gift vouchers, the 50% rule still applies if it's related to food/drink (e.g. a supermarket or restaurant voucher). You also can't claim GST on the purchase price of any vouchers.

If you’re providing a staff party, only 50% of the expenses can be claimed as food and drinks are being provided.​ (You can learn more about this in our entertainment expenses guide.)

Home or wellness-themed giftbox (that doesn't contain any food or drink)

Gift box or basket containing only food and/or drink

Hampers with both food/drink and non-consumables (e.g. a gift basket with wine, chocolate, a candle and a notebook)

In both of these examples, the items will need to be split into 50% deductible (the chocolate/wine items) and 100% deductible (all the other items).

If your business provides gifts, it's helpful to keep a simple record of each gift, its value, who received it, and whether it contains food or drink. Tracking these details makes it easier to monitor the FBT thresholds throughout the year.

For items that are only 50% deductible, you can make this adjustment when reconciling your accounting software, but don't worry if you forget as your accountant will do this at year-end when they're preparing your accounts.

Discover what questions your balance sheet can answer about your business stability and financial health.

Learn what questions your balance sheet can answer about your business's financial health and stability.

What your balance sheet can tell you about your business

Reading financial statements is not the most exciting exercise on the planet, but for a business owner they can surface important information.

Understanding the numbers in your balance sheet can help you spot risks and make growth decisions as well as prove your financial stability to potential lenders or investors.

In this article we breakdown the questions your balance sheet can answer about your business.

The actual cash on hand figure separated from the expected future revenue that you haven’t actually received yet.

If your accounts receivable is high, you have money tied up in unpaid invoices. It may be worth checking that your collections process is working as expected.

How much cash is sitting in unsold stock?

Money sitting idle in the form of unsold stock (or raw materials) is money you don’t currently have available to pay upcoming bills.

What’s the value of all the property, equipment, and intellectual property the business owns?

This is useful for understanding the value of all the underlying assets that power your day-to-day operations and keep your business running.

How much do we currently owe our suppliers?

Keeping an eye on your Accounts Payable helps you strike the right balance between holding onto your own cash as long as possible and keeping your supplier relationships on good terms.

Tracking what liabilities are due in the next 12 months ensures you’re not caught off guard by an upcoming tax bill, credit card payment or short-term loan.

What does our long-term debt look like right now?

Understanding your long-term liabilities is useful for knowing exactly how much of your future revenue is already accounted for.

A business’s net worth is essentially the same as equity i.e. total assets minus total liabilities.

How much are we reinvesting into the business?

By looking at retained earnings, you can see how much profit you’ve kept in the business to fund future growth.

As well as looking at each section of a balance sheet in isolation, it’s also useful to look at how they work together.

They can answer broader questions such as:

By comparing current assets (like cash and accounts receivable) to your current liabilities (like credit card balances, supplier bills, short-term loans), you can assess the business’s ability to cover its short-term obligations.

If your current liabilities are growing faster than your current assets, you could be getting close to a cashflow crunch.

Keeping an eye on this is essential for ensuring you always have enough cash (or assets that can be quickly converted to cash) to keep the business running.

Is the business heavily funded by debt or mostly funded by owner investment and retained earnings?

Reviewing total liabilities against equity indicates how the business is financed. Whichever number is higher tells you where more of your funding is coming from.

Using borrowed funds for growth can be fine if some of the revenue gain is being used to repay that debt, but if it’s just covering day-to-day running costs, then it could be a sign that you’re relying too much on borrowed money.

If the business is heavily funded by debt (i.e. total liabilities is significantly higher than equity), it can become high risk when interest rates rise or the economy slows down.

Is the business heading in the right direction?

Since a balance sheet is just a snapshot at a point in time, comparing balance sheets month-on-month or year-on-year is useful for spotting trends that a single statement won’t show.

Is your cash reserve growing or shrinking?

Are your liabilities increasing or reducing?

Are unpaid customer invoices and unpaid supplier bills increasing or decreasing?

Trends provide a good gauge of whether your business is getting healthier, maintaining the status quo (or close to it) or facing challenges that need to be addressed.

While a balance sheet is a great indicator of financial stability, it won’t tell you how profitable the business is.

A business can have a strong balance sheet and be losing money. Alternatively, a business could be highly profitable and have a weak balance sheet if too much of the business is being financed by debt.

This is why balance sheets and profit and loss statements are often read together since they answer different questions.

We recommend making a habit of reviewing these numbers regularly, so you can move from guessing how your business is doing to knowing where it stands. If you’d rather have an expert keep you accountable, then consider whether regular check-ins with your accountant would be beneficial. Quarterly or monthly meetings can turn these numbers from a chore into someone highlighting the ‘you should probably be aware of this’ and guiding your next steps.

 What your balance sheet can tell you about your business

Financial literacy

Tired of waiting on unpaid invoices? Discover actionable tips to streamline your invoicing process, reduce payment delays, and get your small business paid faster.

How do I get customers to pay faster?

It’s one of the age-old questions. You’ve done the work and are now waiting for payment. For UK small businesses, that wait is longer than most would like with Xero’s Small Business Insights placing the current timeframe between invoicing and payment as 24.1 days on average.

This delay can feel like a long time when you have your own costs to cover. The good news is that some of the delay is within your control. Small changes to how you invoice, how customers can pay and how you follow up can take days or even weeks off the time it takes for money to land in your bank account.

This may sound obvious, but you’d be surprised how often people don’t invoice straight away. The payment clock can’t start until your customer has the invoice and every day you wait to send it is an extra day added to your payment time.

Send invoices on completion of work not at the end of  the month

For ongoing work, invoice at agreed milestones or on a regular schedule

Use templates or repeating invoices in your accounting software to speed up the process

Always include a description of the work, due date, payment details and a reference to avoid any follow-up questions

We recommend invoicing within 1-2 days if not immediately, while your work is still fresh in the customer’s mind.

Offer a few options so that customers can pay in a way that suits them:

Direct debit for regular or recurring work so payments come out automatically on the due date

Card payments, including a mobile card reader if you work on site or in person

Online payments with a pay now link on the invoice

The easier you make it for clients to pay, the better. It’s also worth weighing up the payment processing fees against the time you’d otherwise spend waiting and chasing payment. While it might cost you a fee to provide certain methods, it can save you time in the long run that would be better spent on revenue-generating activities.

For large or long-running projects, a deposit upfront or progress payments along the way can keep cash coming in and reduce the risk of a big unpaid bill at the end.

For this kind of payment structure, make sure the expectations are laid out in any quote and engagement terms so your clients are aware of when payments will be due.

If you have quite long payment terms, many customers will take that time (or longer) to pay. Shortening your terms to 7 or 14 days sets a quicker expectation from the beginning.

This might not work for everyone so check what’s standard in your industry before making any drastic change to your default timeframes. If you do decide to go ahead with the change, make sure you give existing clients a heads-up if you plan to do a blanket change across everyone and not only to new customers.

Life gets busy and sometimes a friendly nudge is all it takes to get your invoice paid. The majority of late payments come down to forgotten invoices rather than someone not wanting to pay.

You can set up automatic reminder emails in your accounting software, both before the due date and at set intervals once it's overdue. This is quick to turn on and means you don’t have to manually chase every invoice.

If an invoice is overdue in a big way, make a quick call. Phone calls are much harder to ignore than an email and can surface any issues that might be holding up the payment. It can also be the difference between an invoice eventually being paid and one that you end up having to write off.

Late fees can be a great deterrent. Whether you actually choose to apply them or not, simply mentioning them in your terms and on your invoices can be enough to encourage timely payment. If you do apply them, make sure it’s consistent so that customers know you’re not messing around and are taking your invoicing and payment process seriously.

The importance of getting paid as fast as possible

Faster payments can be a game-changer for how your business is run both financially and operationally.

Steady cashflow means you can pay your own bills on time and keep a good track record with your suppliers. It also removes some of the stress if you know that money is coming in when you expect it to rather than constantly worrying about your bank balance and whether you’ll have enough cash at any given point in time.

Timely payments can also mean less unproductive time spent chasing. When you’re not constantly managing cash flow gaps or the admin of following up with customers, you can put your time and effort into your business goals or more useful tasks.

Getting paid faster starts with a few small changes

You don’t need to overhaul your business to speed up payments. Start with one or two of the suggestions above and build from there. Each change might only bring payments forward by a few days, but together they can make a real difference to your cashflow.

Business advice

Learn how to track your R&D projects and set up accounting software to meet Inland Revenue's requirements.

Planning to claim the NZ R&D Tax Incentive (RDTI)? Learn how to track your R&D projects and set up accounting software to meet Inland Revenue's requirements.

Record-keeping for R&D tax claims in New Zealand

If you’re planning to claim the R&D Tax Incentive (RDTI) or cash out R&D tax losses (RDTL), Inland Revenue expects to see that your project was planned, tracked and kept separate from everyday operations. The good news is that it doesn’t have to be complicated.

Here’s what you need in place so your records are ready when it’s time for your accountant to organise your R&D claim.

Inland Revenue requires tracking contemporaneously, which means as it happens not pieced together at the end of the financial year. Because of this, we recommend building a system where documentation is a standard part of your R&D process.

Project logs: use whatever system works. This can include project management tools like Jira or Asana, technical design documents, git commits or lab notebooks.

Evidence of what hasn’t worked: while this may sound counterintuitive, keeping records of what didn’t work is the best proof for why there’s a scientific or technological uncertainty that your R&D is trying to solve. Examples include failed tests, code that crashed or prototypes that fell short.

Minutes and notes: document any big decisions or project pivots. It doesn’t have to be a well-polished summary. Meeting notes or a dedicated chat channel (like a Google space or Slack) is fine.

2 Set up your accounting software to keep R&D costs separate

If you’re running multiple research and development projects or you and your team are doing R&D alongside other work, your R&D-related spending needs to be tracked and be easy to report out of your accounting software.

In Xero, you can use either a tracking category or Xero projects to do this. 

Create an R&D tracking category (or project if your sub includes Xero projects)

Add each project as an option: if you have multiple projects, list each separately e.g. Project A, Project B

Code costs as you go: when you do your bookkeeping, assign bills, receipts, contractor invoices and team pay (for related R&D hours) to the correct project

The main aim is to have a tidy project-by-project record of your R&D costs and where relevant, kept separate from any business-as-usual expenditure.

Wages are often the biggest part of an R&D claim which makes them the most likely to be scrutinised by Inland Revenue. Rough estimates like “Joe spent about half a year on this” won’t be enough. It needs to be specific and well-documented.

Timesheets: anyone working on the project should log their hours and show a clear split between core R&D activities and any business-as-usual work.

Role clarity: it’s important to keep a record of the professionals working on the R&D such as engineers, developers or scientists. Hours worked by admin or marketing personnel are generally not eligible as part of an R&D claim.

If daily timesheets feel like a pain, start small. A weekly entry is far better than not logging anything at all.

4 Get your contractor and third-party paperwork right

If you use contractors or other third parties as part of the R&D project their paperwork needs to show exactly what they did for you.

Scope: use a signed contract or statement of work that explains the experiment or development work the contractor is doing

Itemised invoices: ask the contractor to list hours and the specific tasks they completed when they invoice you. A flat monthly retainer with a generic description makes it hard to show what the cost of their labour relates to

Confirm intellectual property (IP) ownership: make sure your contracts state that your business keeps the IP of any work the contractor or third party carries out. Ownership of the experiment/development results are needed for tax claim eligibility.

To summarise everything we’ve discussed, here’s a quick cheat sheet of everything you should have in place to support any R&D tax credit or loss claim.

Project log or timeline that gets updated as work progresses

Key decisions captured as meeting notes or in a dedicated team chat

R&D tracking category set up in your accounting software

Costs coded to the tracking category or project at the time of entry (not caught up later in the year)

Staff timesheets with separation of R&D hours from other work hours

Contractors and third parties have a signed scope of work and provide itemised invoices

Contracts confirm your business owns the IP for any work done by employees, contractors or other third parties

Good record-keeping takes a lot of discipline but it plays a key role in making your R&D claim faster to prepare and easier to defend against any IRD scrutiny. If you’re planning an R&D claim or want a hand with the process, get in touch with us. We can help get your systems ready and walk your through the process.

Explore how to pull the right levers to improve cashflow and extend your business's runway or safety net.

Actionable strategies for extending your cash runway through increased revenue, expense reduction and additional capital.

3 ways to extend your cash runway

You’ve probably heard the phrase “cash is king” a million times and that’s probably no truer than in business. While it might not look like physical bank notes in the pure sense of the word, having cash in the bank is what helps keep your business running.

This is why understanding your cash runway/buffer and the levers you can pull to extend them are important. Your cash runway is how long your business could survive on current cash reserves, assuming revenue and expenditure remain unchanged. Meanwhile, your cash buffer is the safety net of how long you could keep going if revenue stopped altogether.

Businesses that are facing challenging or uncertain times often consider extending their runway or buffer so they’re well-equipped for any hurdles that may come. There are three ways to do this: increase revenue, reduce expenses and/or inject capital. Most businesses look to do a combination of all three.

Improving your cash inflow isn’t just about generating more sales. It can involve freeing up liquidity and exploring other opportunities to earn more income or change how you’re collecting that income.

Speed up your accounts receivable: This can be through early payment discounts, tightening payment terms or even improving follow-up on unpaid invoices.

Reduce inventory: Sell off stock that’s collecting dust. Even if you sell it at cost, that’s cash that’s now in the bank rather than on a shelf.

Sell redundant assets: If you have equipment or tools that aren’t needed for core operations, selling them can inject much-needed cash into the business. Consider it spring cleaning for your business.

Increase prices: If costs keep climbing and you haven’t increased your prices in a while, it might be time to consider it.

Drive more sales to existing customers: Upsell additional services, cross-sell complementary products or increase order frequency.

Consider new business or payment models: Explore alternative revenue streams or pricing structures. This could be a subscription model instead of one-off sales, a service tier you didn’t have before, or finding ways to still generate sales during off-peak periods.

Focus on high-margin offerings or markets: Not all revenue is equal, so consider letting go of revenue streams that aren’t pulling their weight and refocus on ones that are.

Cutting costs to extend your runway or buffer doesn’t mean your business needs to suffer. It just means being more deliberate with what you’re cutting or adjusting.

Reduce nonessential spending: These are expenses that don’t directly affect operations.  For example, travel, conferences, or team celebrations.

Downgrade or cancel software subscriptions: Most businesses have software tools that are no longer being used or are costing them more than it should.

Pause major hires: Hiring freezes or even a redundancy (which may be a difficult decision) can have a dramatic impact. While not always the easiest decision or conversation to have, these decisions are sometimes necessary.

Renegotiate supplier terms: Extending payment terms by 15-30 days or negotiating volume discounts on fast-moving products can make a small but useful difference.

Review fixed costs: Are you still paying the best rate possible for your insurance, internet, and power? In the same way you typically audit these in your personal life, it’s a good idea to periodically review these for your business too.

Delay planned purchases: Postponing non-urgent purchases or equipment upgrades can free up some short-term cash and give you additional breathing room. You can always reassess priorities once your runway is more comfortable.

Sometimes extending your runway or cash buffer requires external capital. This can include:

Owner injection: If you’re able to, putting some of your own money back into the business can buy you some breathing room without the complexity of outside financing.

Crowdfunding or capital raises: Consider getting additional funding via a crowdsourcing campaign or from angel or venture capital investors.

Grants and subsidies: See what government or local support is available. Sometimes there is industry-specific funding available or grants for particular types of projects.

Bank finance or alternative lending: Lines of credit or loans can help you in the interim while you focus on improving your runway through some of the other areas we’ve mentioned. You could also consider invoice financing (finance based on unpaid invoices) as a short-term measure.

We won’t lie and say extending your runway or cash buffer is easy. It can take some serious effort and sometimes difficult conversations with team members, suppliers or creditors. However, the payoff can be significant. Any move that makes you feel less stressed about surviving the short-term and more confident that the business is ok and can weather any storm is a win in our books.

If you’re unsure which levers to pull, your accountant is a valuable resource to help. They can model different scenarios and provide advice on which actions will have the biggest impact.

Understand the difference between cash runway and buffer to better prepare for unexpected events.

Understand the difference between cash runway and cash buffer to better prepare for unexpected events that may occur in your business.

Cash Runway vs Cash Buffer

It’s a known fact that many businesses fail due to poor cashflow. That isn’t new knowledge and unfortunately is a statement that will likely always ring true. This means that any metrics that provide insight into cashflow are vital for staying afloat and knowing where you actually stand. That’s where cash runway and cash buffer come in. They're both surprisingly simple to calculate and help you prepare for the unexpected.

Cash runway measures your survival time i.e. how long your business could operate for at its current burn rate before it runs out of cash.

Cash runway = current cash balance / net cash burn
Where net cash burn = monthly cash outflows - monthly cash inflows

Example: You’ve got $100,000 in the bank. Your monthly cash inflow (revenue) is $10,000 and your monthly cash outflow (expenses) is $35,000. Your net monthly burn is $25,000. That’s 4 months of runway at the current burn rate.

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