Entertainment vs networking: What can businesses claim?

For business owners, few areas of tax cause more confusion than the line between entertainment and networking expenses. Get it right, and you can legitimately reduce your tax liability. Get it wrong, and you risk an Inland Revenue (IRD) audit or missed deductions. Here is what you need to know.

The fundamental rule: It’s about business purpose

The IRD’s position is straightforward in principle: you can claim the cost of entertainment used to build business contacts, keep your employees happy, or promote your goods and services — as long as it is helping you earn income. The complication arises in how much you can claim, because not all business-related entertainment is treated equally.

When you can only claim 50%

“Entertainment” refers to hospitality, food, drink, or recreational activities that have both a business purpose and a private benefit. Because of this dual purpose, the IRD generally allows only 50% of the cost to be claimed.

Common examples of 50% deductible entertainment include:

• Taking clients out for lunch or dinner at a restaurant
• Providing drinks for staff outside of working hours
• Hosting clients in a corporate box at a sports event
• Staff Christmas parties
• Golf days or wine tours
• Gifts of food or drink to clients

Even if business is discussed, these activities still fall under the 50% rule because of the “significant private element” enjoyed by the people attending. Typically, these activities take place away from the workplace or outside usual working hours.

When you can claim 100%

Networking is where many business owners assume they can claim 100% — but the IRD does not use “networking” as a separate category. Instead, what matters is where the networking takes place, who is present, and whether there is a personal enjoyment element.

A business breakfast at your office with a potential client is likely 100% deductible. Dinner at a restaurant with the same person is 50%. Judgement needs to be exercised, as the answer may not always be straightforward.

Examples of fully deductible networking expenses include:

• Tickets to business networking events
• Professional association memberships
• Conferences, seminars, and trade shows
• Training and professional development
• Meals provided at your workplace for training or structured meetings (not social events)
• Meals at a structured business meeting with a documented agenda and purpose

The key distinction is intent and structure. If the purpose is clearly tied to earning income — and is not primarily social — it is generally fully deductible.

Strategic considerations for business owners

Understanding these rules is not just about compliance, it is about tax planning. Here is how business owners can apply the legislation to their advantage.

1. Add structure to client meetings

If you are meeting a client or prospect, adding structure can shift the expense from 50% deductible to 100%. Set a clear agenda, document the purpose of the meeting, and keep brief notes on what was discussed. A meeting with a well-defined business purpose is fully deductible; an informal lunch is not.

2. Prioritise networking events over social entertainment

Rather than taking a client to a sporting event, consider a business breakfast, an industry conference, or a professional workshop. These activities are fully deductible and are often more effective for developing business relationships.

3. Use conferences and professional development strategically

Conferences and professional development activities are 100% deductible, position you as an expert in your field, and provide valuable networking opportunities. This is where tax efficiency and business growth align directly.

4. Maintain thorough records

In the event of an IRD review, you will be expected to demonstrate who attended, the purpose of the meeting, what was discussed, and the relevant receipts and dates. Comprehensive documentation is the strongest support for any deduction claimed.

The bottom line

The distinction between entertainment and networking is not merely semantic — it directly affects what you can legitimately claim. Business owners who understand the rules are better positioned to maximise deductions, strengthen client relationships, reduce taxable income, and operate with confidence.

When assessing an expense, ask yourself: Is this primarily for business, or primarily for personal enjoyment? That answer will generally determine whether an expense is 100% deductible, 50% deductible, or not deductible at all. If you are uncertain, err on the side of caution and claim only 50%.

For further detail, the IRD has published guidance on entertainment expenses and what is deductible, along with a comprehensive booklet: Entertainment expenses IR268 (2024).