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Tax Treatment of Meal Expenses

Tax Treatment of Meal Expenses for Self-Employed Taxpayers

July 29, 2021

In a final interpretation released on 7 July 2021, the IRD has concluded that in general, meal expenses for self-employed taxpayers are not deductible for income tax purposes, nor is input tax for GST purposes able to be claimed on such expenses.

Expenses incurred to enable income to be earned are generally deductible however a distinction is made between expenses incurred in order to earn an income versus to enable a person to live.  Food is regarded as being private or domestic in nature and accordingly the IRD expressly denies a deduction for such in the Income Tax Act 2007, which is the basis for the IRD’s position for self-employed taxpayers. 

It is noted however that extra costs in relation to meal expenses incurred when a self-employed taxpayer works out of town may be deducible if it is deemed that the working conditions are sufficiently unusual.  This does not mean that a self-employed taxpayer’s own meal is deductible just because they are working away from home, but more that the facts of each circumstance must be looked at carefully to determine if the extra cost element is justified.

However, meal allowances or reimbursements are deductible for income tax purposes for employees or self-employed persons who have incorporated a closely-held company and have become an employee of that company, whilst they are performing their duties.  This permissibility for employees is on the basis that expenditure incurred in relation to paying employee expenses has a nexus with deriving accessible income for the business.  This therefore means that the income tax treatment of meal expenses for self-employed taxpayers is different from the way those same expenses are treated for employees.

The GST input tax treatment of meal expenses for a self-employed taxpayer follows the same line of reasoning as that of the income tax treatment.  If meal expenses are regarded of a private or domestic nature for income tax purposes and the expenses are deemed to be non-deductible, then the input tax for GST purposes would also not be deductible.  The basis of this is that the meal expenses in such circumstances are not used to make taxable supplies.

Get in touch with one of our team if you want to discuss how these rules might affect you and your business.

About Kylie Liew

Avatar photoKylie is Managing Director and Qualifying Principal of Giles & Liew Chartered Accountants. Her combined experience in Accounting and Business Advisory, together with leadership of business transformation projects and the development of the firm's Digital Transformation services makes her well-placed to help New Zealand businesses grow and succeed in today's ever changing digital business environment. Kylie understands the complexities of business ownership in New Zealand and works with clients to formulate business strategies to help them achieve sustainable growth.

Digital disruption of the Accounting industry presents a unique opportunity to redefine the role of the Business Advisor.  Kylie is committed to exploring innovative ways to achieve growth and create success. She helps clients turn their vision into real value.

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