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Sponsorship and Deductions

General Guideline

Providing sponsorship for your team or community event can be fully deductible depending on the type of sponsorship, as long as your business receives promotion.

Fully Deductible Sponsorship

For sponsorship to qualify as fully deductible, it must meet the general deductibility criteria. The IRD must ascertain that the expense relates to advertising and not personal recreation. Therefore, for the expense to be deductible, your business must receive promotion, and the recipient of the sponsorship must benefit from it in some way.

Examples of fully deductible sponsorship include:

  • Contributing $2,000 towards the local rugby league team’s new uniforms, with the team displaying your business logo on the uniforms in return.
  • Donating $10,000 to the Life Education Trust for their “Colour for Life” event, with the trust agreeing to advertise your business in all media publications.

Expenditure on Sponsorship of a Capital Nature

If the expenditure is of a capital nature, such as a permanent neon sign or billboard, it is not fully deductible. Instead, it must be capitalized and depreciated as follows:

  • Neon sign: Depreciation rate of 21.6% on a diminishing value basis.
  • Non-electrical sign: Depreciation rate of 11.4% on a diminishing value basis.

If you have questions, at Zest we are happy to help you! please contact us today.