With the Christmas season almost upon us and businesses starting to plan end of year celebrations and gifts to clients/staff it’s good to be aware of what and how much is claimable.
Gifts to Staff or Clients
The cost of gifts to staff or clients will generally be 100% tax deductible unless they are for food and drink.
Vouchers are a common and appreciated method of gifting, however vouchers for food, beverages and supermarkets are also caught by entertainment rules and you will only be able to claim a maximum of 50%. Vouchers for Hardware/Homeware Stores, Beauty Salons, Experiences etc will allow you a 100% claim.
These expenses are categorised as either staff expenses or client gifts.
To avoid having to pay FBT on gifts to staff, you will need to keep the total amount under $1,200 per employee, per year. If you file quarterly FBT Returns, you are limited to $300 per employee, per quarter.
If you are the business owner and being paid via the payroll (filing and paying PAYE regularly) you can also receive the $1,200 per year or $300 per quarter allowance for gifts.
Gifts that display your branding such as cooler bags, picnic blankets and clothing (often for clients) are 100% claimable as advertising/promotional products.
Giving Gifts to Tenants if you have a Rental Property
Some landlords like to give their tenants a gift at Christmas time so just a heads up about what is deductible and what is only partially deductible.
If you give a gift that includes food or drinks – you will only be able to claim 50% of the amount spent on these as a rental deduction.
If you give them a gift that doesn’t include any food or drinks – you will be able to claim all of the cost as a rental deduction.
Cash Bonuses for Staff
Monetary bonuses to employees must be included in the wages for the week and PAYE paid on them.
This can potentially change employees tax obligations or entitlements and you may have to make further deductions for student loans, kiwisaver or child support.
For your employee to enjoy the full value of the intended gift, buying a present/voucher could be better value than a cash bonus which will be taxed through the payroll.
Staff Christmas Party
The costs of food & drink and any incidental expenditure relating to things like hireage of crockery, glassware, music or other entertainment is maximum 50% deductible for income tax purposes – this applies whether the party is held on the business premises or off site.
Christmas Lunch/Dinner
The cost of taking colleagues or staff out for an end of year lunch or dinner will generally be 50% deductible for companies and 25% deductible for Sole Traders.
Please let us know what any Christmas expenses are for, so we can ensure the correct claims are made. A good description in your online software or spreadsheet and we’ll take care of the rest. If you’re doing your own coding, just split the 50% or 25% ones into claimable / non-claimable.
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