Sponsorship and Tax: Are You Missing Out?

By Daran Nair of Greenlane CA Limited

Inland Revenue has released a new Interpretation Statement IS 26/10, “Income tax implications of providing sponsorship”, setting out when sponsorship expenses are tax deductible and when they are not. This guidance is important for any business that supports local schools, sports teams, charities or community events and wants clarity on how those costs are treated for tax.

Businesses in our community are constantly asked to sponsor school events, sports teams and charities – and many say “yes” without realising they may be entitled to valuable tax deductions. The new statement makes it clear that, to be deductible, sponsorship must be genuinely about promoting your business – for example, your logo on uniforms, signage at events, or naming rights that clearly advertise your services. Having a written agreement that spells out how your business will be promoted and showing how the sponsorship fits into your marketing strategy, are powerful evidence in your favour.

Trouble starts when private motives creep in. If you sponsor your child’s elite school and receive a big fee discount in return, there is a real private benefit, and you may have to split the cost between business (deductible) and private (non-deductible) purposes. By contrast, when any personal enjoyment – such as an owner’s interest in a sport – is only incidental to a well-planned advertising campaign, the full amount can still be deductible.

Practical scenarios

• A local mechanic sponsors a community cricket team, paying for new uniforms in return for the business name and phone number across the front of every shirt and on the boundary rope signs at home games. The purpose is clearly business promotion and there is no personal benefit, so the full cost is likely to be deductible as advertising.

• A restaurant pays an upfront fee for a one-year sponsorship of a cultural festival, in return for having its logo on all posters, social media promotions and the main stage banner. Because the sponsorship runs over 12 months, the cost is deductible, but the restaurant may need to spread the deduction over the period if the payment is for more than one tax year.

• A building contractor offers to renovate a community hall free of charge, on the condition that a permanent plaque and roadside sign display the company’s name as sponsor. The materials and wages cost the business money, but those costs can be deductible because the work is done to promote the business and reach local clients, not simply as a private favour.

• A supermarket regularly donates sausages, bread and condiments for school fundraising barbecues, with its name printed on the gazebo and mentioned in school newsletters. The stock is part of its normal trading activities, and provided as part of a conscious marketing strategy, so the cost is generally deductible as part of doing business.

• An IT consultant sponsors a sports club mainly because they play there on weekends and only adds a small logo to the club website with no other visibility. If questioned, it may be difficult to show that promotion is the real purpose rather than personal enjoyment, and only part – or possibly none – of the cost may be deductible.

Some sponsorship is also limited by other rules. Spending on food, drink, corporate boxes and hospitality may be only 50 per cent deductible under the entertainment rules, unless the event is mainly to promote your business to the general public on the same terms as your guests and staff. Large, upfront payments that secure naming rights for several years usually need to be spread over the life of the deal, rather than claimed all at once.

Sponsorship does not have to be cash. Donating trading stock (for example, a supermarket providing sausages and bread for a school fundraiser) is generally deductible in the normal way, and in many cases, you will not be taxed on a “deemed” market value if it is genuine business promotion or given to a recognised charity. Providing your services for free can also be deductible, provided you can show a real business-promotion purpose and not just personal goodwill.

The message from Inland Revenue’s new statement is clear: structure sponsorship as advertising, document the promotional benefits, and be honest about any personal perks. With a little planning, local businesses can support local causes – and legitimately reduce their tax bills at the same time.

Published date: April 2026

Contact Greenlane CA Limited

• Email: info@glca.co.nz

• Phone: +64 9 522 5182

• Website: www.glca.co.nz

• Address: 97 Great South Road, Greenlane, Auckland 1051

Disclaimer

This newsletter is published by Greenlane CA Limited for informational purposes only. The content provided herein is of a general nature and does not constitute professional tax, accounting, legal, or financial advice. While every effort has been made to ensure the accuracy and completeness of the information contained in this newsletter, Greenlane CA Limited makes no representations or warranties, express or implied, as to the accuracy, reliability, completeness, or currency of the information.

Readers should not act or refrain from acting based solely on the information in this newsletter without first seeking professional advice tailored to their specific circumstances. Tax laws and regulations are subject to change, and the application of these laws depends on the particular facts and circumstances of each case.

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For advice specific to your situation, please contact Greenlane CA Limited directly.