IRD have recently refreshed their commentary regarding the ability of self-employed to claim meal expenses. In general, meal expenses incurred by a self-employed person are non-deductible (for Income Tax & GST) because they are of a private or domestic nature.
An expense is of a private nature if it is exclusively referable to living as an individual member of society and domestic expenses are those relating to the household or family unit, in other words, they are necessities of life. Food is considered a private and domestic expense.
Although a meal may be purchased while on “travel for business”, this on its own is not reason enough for self-employed taxpayers to claim a deduction.
There are limited circumstances where a self-employed taxpayer’s expenses for food may be deductible. These are:
- Where the requirements of the taxpayer’s business imposed the extra meal costs because of a remote working location or unusual working hours
- Where the food cost is ‘entertainment expenditure’ incurred when entertaining others in the course of earning income (generally limited to a 50% claim). See our article for more details on Entertainment Expenditure
It should be noted that there is a difference in treatment between self-employed taxpayer’s meal expenses as compared to:
- Employers paying a meal allowance or reimbursement to employees while performing their duties
- Closely held companies paying meal allowances or reimbursements to shareholder employees (ones being paid via payroll or shareholder salary) while performing their duties
In these instances, the allowance/reimbursement will be tax deductible to the employer but the employer will need to consider whether the allowance or reimbursement qualifies as non-taxable to the employee and if not, account for the allowance/reimbursement through the PAYE system.
Choosing not to prepare a meal is not sufficient reason to make a meal deductible. There must be something external to the taxpayer imposing these extra costs. Further, in these cases generally only the extra food costs (above what a meal at home would normally cost) can be claimed, and evidence of this must be retained and may need to be provided to IRD.
IRD have some examples of what can and cannot be claimed.
If you have any queries about the deductibility of any specific items, please do not hesitate to contact your client manager.