Taking a Client Out for Lunch? Here’s What You Can (and Can’t) Claim
Taking a client out for lunch is a common part of doing business in New Zealand. Whether it’s to build relationships, discuss opportunities, or maintain goodwill, business lunches can be valuable. However, when it comes to tax, entertainment expenses are an area where many businesses get confused — and mistakes can be costly.
Here’s what you need to know about claiming client lunch expenses correctly.
Is a Client Lunch Tax-Deductible?
In most cases, taking a client out for lunch is considered entertainment expenditure under Inland Revenue (IRD) rules. Entertainment expenses are generally only 50% deductible for income tax purposes.
This means that if you spend $200 on a client lunch, only $100 can usually be claimed as a tax-deductible expense. The remaining 50% is non-deductible, even though the cost was incurred for business purposes.
What Counts as Entertainment?
Entertainment typically includes food and drink provided:
At a restaurant, café, bar, or similar venue
In a social setting rather than a working environment
Where the primary purpose is hospitality rather than work
Client lunches, dinners, drinks, and functions usually fall into this category.
When Can 100% Be Claimed?
Some food and beverage costs may be 100% deductible if they are not considered entertainment. Examples include:
Meals consumed while travelling for work (overnight business travel)
Light refreshments provided at a workplace meeting (e.g. tea, coffee, sandwiches)
Meals provided on-site for staff during work-related meetings or training
The key distinction is where and why the food is provided.
What About GST?
GST treatment follows a similar rule:
If the entertainment expense is 50% deductible, then only 50% of the GST can be claimed.
If the expense is 100% deductible, then 100% of the GST can be claimed.
For example, if a client lunch costs $115 including $15 GST, you can usually claim $7.50 GST, not the full $15.
Record-Keeping Is Critical
IRD expects clear records for entertainment expenses. Make sure you keep:
A valid tax invoice
Notes on who attended the lunch
The business purpose of the meeting
Good record-keeping helps justify claims and reduces risk if your business is reviewed or audited.
Common Mistakes Businesses Make
Some of the most common errors include:
Claiming 100% of client meals as deductible
Claiming full GST on entertainment expenses
Not distinguishing between staff-only meals and client entertainment
Poor documentation or missing invoices
These mistakes can quickly add up and may result in penalties or reassessments.
Final Thoughts
Taking clients out for lunch can be great for business — but it’s important to understand the tax rules so you don’t overclaim or underclaim. Entertainment expenses are closely monitored by IRD, making it essential to get this area right.
If you’re unsure how entertainment expenses apply to your situation, getting professional advice can save time, stress, and money in the long run.