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Goods and Services Tax Act 1985

Returns and payment of tax - Calculation of tax payable: deductions, apportionment, other adjustments

21I: Fringe benefits and entertainment expenses

You could also call this:

"Rules about tax on work perks and entertainment expenses"

Illustration for Goods and Services Tax Act 1985

If you give someone a fringe benefit, it is like you are selling them something. This happens when you follow the FBT rules of the Income Tax Act 2007. You are treated as supplying goods and services as part of your business.

When you give someone a fringe benefit, there are some exceptions. These exceptions are when the other person pays for the fringe benefit, or when the fringe benefit is exempt from tax. You can find out more about exempt supplies in section 14 and about tax at a rate of 0% in section 11, 11A, 11AB, or 11B.

If you spend money on entertainment, you might not be able to claim all of it back as a tax deduction. This is because of rules in sections DD 1 to DD 3 of the Income Tax Act 2007. In this case, you are treated as supplying entertainment with a value equal to the amount you cannot claim back.

The time when you are treated as supplying the entertainment is usually when you file your tax return. However, if you incurred the entertainment expenses before 1 October 2010 and you choose to apply this rule, the time of supply is treated as 30 September 2010.

Some types of payments are not included when working out the value of entertainment you supply. These include entertainment allowances to employees that are exempt income under section CW 17, CW 17B, CW 17C, or CW 18 of the Income Tax Act 2007.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM83958.

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Part 3Returns and payment of tax
Calculation of tax payable: deductions, apportionment, other adjustments

21IFringe benefits and entertainment expenses

  1. If a registered person has or is deemed to have provided or granted a fringe benefit to another person under the FBT rules of the Income Tax Act 2007, the providing or granting of the fringe benefit is treated as being a supply of goods and services made by the registered person in the course or furtherance of their taxable activity.

  2. Subsection (1) does not apply to the extent that—

  3. the other person paid an amount for the receipt or enjoyment of the fringe benefit; or
    1. the fringe benefit arose by virtue of an exempt supply under section 14; or
      1. the fringe benefit arose by virtue of a supply that is charged with tax at the rate of 0% under section 11, 11A, 11AB or 11B; or
        1. the fringe benefit is, or is deemed to be, provided or granted by a registered person in the course of making exempt supplies.

          1. Despite sections 9 and 21C, the supply of goods and services is treated as taking place at the time the fringe benefit is or is deemed to be provided or granted.

          2. If sections DD 1 to DD 3 of the Income Tax Act 2007 apply to limit the deduction under that Act for expenditure or loss (including depreciation loss) that a registered person is allowed in the course of or furtherance of a taxable activity with respect to entertainment, as described by section DD 2 of that Act,—

          3. the registered person is treated as having supplied entertainment with a value equal to the amount of the deduction prevented by sections DD 1 and DD 2 of that Act; and
            1. unless subsection (4B) applies, the time of the supply is treated as being the earlier of—
              1. the date on which the person furnishes a return of income under section 37 of the Tax Administration Act 1994 for the tax year for which the deduction is allowed; and
                1. the date by which the person must furnish a return of income under section 37 of the Tax Administration Act 1994 for the tax year for which the deduction is allowed.

                2. Despite subsection (4)(b), for a registered person who is treated as supplying entertainment as described in subsection (4), the time of supply for that entertainment is treated as being 30 September 2010 if—

                3. the relevant expenditure or loss for the entertainment is incurred before 1 October 2010; and
                  1. the registered person chooses to apply this section.

                    1. For the purpose of subsection (4), expenditure does not include an entertainment allowance to an employee or a reimbursing payment that is exempt income under section CW 17, CW 17B, CW 17C, or CW 18 of the Income Tax Act 2007.

                    Notes
                    • Section 21I: inserted, on (applying to goods and services treated as being supplied on and after 10 October 2000), by section 100(1) of the Taxation (GST and Miscellaneous Provisions) Act 2000 (2000 No 39).
                    • Section 21I(1): amended, on (effective for 2008–09 income year and later income years, except when the context requires otherwise), by section ZA 2(1) of the Income Tax Act 2007 (2007 No 97).
                    • Section 21I(2)(c): amended, on , by section 158 of the Taxation (Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) Act 2003 (2003 No 5).
                    • Section 21I(3): substituted, on , by section 68(1) of the Taxation (Beneficiary Income of Minors, Services-Related Payments and Remedial Matters) Act 2001 (2001 No 4).
                    • Section 21I(4): substituted, on (effective for 2005–06 tax year and later tax years, except when the context requires otherwise), by section YA 2 of the Income Tax Act 2004 (2004 No 35).
                    • Section 21I(4): amended, on (effective for 2008–09 income year and later income years, except when the context requires otherwise), by section ZA 2(1) of the Income Tax Act 2007 (2007 No 97).
                    • Section 21I(4)(a): amended, on , by section 361 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section 21I(4)(b): amended, on , by section 50(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
                    • Section 21I(4B): inserted, on , by section 50(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
                    • Section 21I(5): amended (with effect on 1 April 2005), on , by section 712 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                    • Section 21I(5): amended, on (effective for 2008–09 income year and later income years, except when the context requires otherwise), by section ZA 2(1) of the Income Tax Act 2007 (2007 No 97).