IRD Update-Income tax and GST – Treatment of meal expenses

Inland Revenue has released a final version of the interpretation statement IS 21/06 “Income tax and GST – treatment of meal expenses”.

The Interpretation Statement concludes that in general, self-employed taxpayers cannot deduct meal expenses for income tax purposes. In a broad sense, expenditure on the necessities of life are incurred by a person in deriving assessable income for the purposes of the general permission in s DA 1 of the Income Tax Act 2007. However, s DA 2(2) denies a deduction for an expenditure or loss to the extent to which it is of a private or domestic nature. Domestic expenses relate to the household or family unit. Food is in the private or domestic category. There are limited circumstances where expenditure on food may be deductible, such as where the requirements of a taxpayer’s business imposed extra meal costs because of a remote working location or unusual working hours.

This conclusion means that there is a difference between self-employed taxpayers’ meal expenses compared to:

  • • employees receiving meal allowances or reimbursements while performing their duties (deductible expenditure to the employer, exempt income of the employee, not subject to FBT), or
  • • “self-employed” persons incorporating a closely-held company and becoming an employee to receive the same treatment as any other employee.

In the GST context, where meal expenses are of a private or domestic nature for income tax purposes, and non-deductible, input tax on the expenses cannot be deducted for GST purposes. The main reason for this conclusion is that goods and services used for private and domestic purposes are not used for making taxable supplies.

Source: IS 21/06 “Income tax and GST – treatment of meal expenses”, Inland Revenue website, accessed 7 July 2021.

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