Tax Deductions on Entertainment & Gifts

As Christmas is near most businesses will be giving to their employees, clients and sometimes charities. From small team meals to extravagant Christmas functions for the whole family. When it comes to claiming tax deductions this Christmas there are very precise rules that apply. I have put together this simple guide about tax on Christmas entertainment and gifts to help you through the festive season.

If you are planning on giving Christmas gifts to your employees, clients, suppliers, you need to know that some gifts are not fully tax deductible as they are counted as entertainment expenditure. Please note that you may claim the full cost of your employee gifts if they do not fall within the business entertainment rules but you may need to pay FBT (Fringe Benefit Tax) if the cost exceeds more than the general employee expectancy exemption and maximum employer exemption.

50% Deductible:
• Christmas ham
• Gift hamper
• Meal voucher
• Bottle of wine
100% Deductible
• A calendar
• Book voucher
• Gift Voucher
• Tickets to sports games (excludes corporate boxes) 
• Movie tickets
• Any gifts that are not consumables
• Making a donation on behalf of them to a registered charity.

There are rules that apply to deductions for end of year functions, Christmas parties and other client/customer or employee entertainment expenses. Some of these expenses are fully deductible while others are only 50% deductible and others aren’t deductible at all. Please also note that if you claim 50% deduction back for a business entertainment expense you need to make the required GST adjustments and will be required at the time your Income tax is filed.
Here are some tips to help you:
0% Deductible 
• Taking your family or any relatives who do not work in your company out for dinner or for a vacation within or outside New Zealand.
50% Deductible 
If your client or customer, employee or anyone associated with your business has a greater opportunity to enjoy the entertainment than the general public, you can only deduct 50% of the costs. Some examples are:
• Accommodation for a weekend away for the team within New Zealand including any drinks and food provided. 
• Hiring of a launch to entertain your clients or customers.
• Function hosted in a corporate box – this includes tickets as well as food and drinks provided.
• Staff Christmas parties
• Christmas drinks for team members or clients and customers at a bar. 
• Restaurants providing their team members food at drinks at a social function in their restaurant.

100% Deductible
These include entertainment expenses that are supplied for charity and entertainment purposes outside of New Zealand. These include:
• Donating food for a Christmas party in a hospital for children.
• Providing entertainment including drinks and food at a promotional stand for the Christmas Festival.
• Holding the Christmas party overseas.

If you have any questions about any tax deductions you may be entitled to feel free to contact Samantha on 0223034127, email sam@solvingaccountsmatters.co.nz, message Sam on Facebook www.facebook.com/solvingaccountsmatters or check out the website at www.solvingaccountsmatters.co.nz

We hope everyone has a great Christmas and enjoys the holidays with your families and loved ones.