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.
About Kiwitax – Award winning business improvement, tax and accounting service
Here’s the thing. As abusiness,rental property owner orstart-up, you get a kick out of having your own gig. But chances are dealing with yourtax and accountingleaves you cold. Good news! We love it, so hand it over to Kiwitax and we’ll look after it all for you.
Whether you deal with us online, by phone or drop into our Napier office, you’ll find a friendly, professional hardworking team ready to work with you, however you keep track of your financial information and from wherever you do business. And all for a fixed price. It takes just two minutes to get a quote.
Plus if you’re at a loss to know how to improve aspects of your business – from growth planning to cashflow management, even tax debt and so much more – we’re all over that too. OurBusiness Improvementadvisors can help you make a plan and put it into action.
Kiwitax are a preferred training provider for Business Improvement services through the Regional Business Partner Network Capability Voucher Scheme. This is a government funded scheme designed to boost business capability by providing funding of up to 50% of approved training programs with specified training providers up to a maximum value of $5000.
If you liked this article and want to make improvements in your business, with quarterly coaching sessions specifically tailored to support you to identify and achieve your business goals, lets chat!
As an expert in business taxation and accounting, I bring a wealth of knowledge and practical experience to guide you through the intricacies of claiming expenses during the Christmas season. Over the years, I've assisted numerous businesses in optimizing their financial strategies, ensuring they make the most of available deductions while staying compliant with tax regulations.
Let's delve into the concepts outlined in the article:
-
Tax Deductibility of Gifts to Staff or Clients:
- Gifts to staff or clients are generally 100% tax deductible, except for those categorized as food and drink.
- Vouchers for food, beverages, and supermarkets fall under entertainment rules, allowing a maximum claim of 50%. Vouchers for other categories like Hardware/Homeware Stores, Beauty Salons, and Experiences are 100% claimable.
-
FBT (Fringe Benefits Tax) Considerations for Gifts to Staff:
- To avoid paying FBT on gifts to staff, the total amount should be kept under $1,200 per employee per year.
- For quarterly FBT Returns, the limit is $300 per employee per quarter.
- Business owners paid via payroll can also receive the $1,200 per year or $300 per quarter allowance for gifts.
-
Claimability of Branded Gifts:
- Gifts displaying branding, such as cooler bags and clothing, are 100% claimable as advertising/promotional products.
-
Gifts to Tenants with Rental Properties:
- Gifts to tenants during Christmas have specific tax implications. If the gift includes food or drinks, only 50% of the amount spent is deductible as a rental deduction.
-
Cash Bonuses for Staff:
- Monetary bonuses to employees are subject to PAYE, potentially impacting tax obligations or entitlements.
- Consideration is given to the tax efficiency of presents/vouchers versus cash bonuses.
-
Staff Christmas Party Expenses:
- Costs related to food, drink, and incidental expenditures for staff Christmas parties are 50% deductible for income tax purposes.
-
Deductibility of Christmas Lunch/Dinner Costs:
- The cost of taking colleagues or staff out for an end-of-year lunch or dinner is generally 50% deductible for companies and 25% deductible for Sole Traders.
-
Recordkeeping and Coding:
- Proper description of Christmas expenses in online software or spreadsheets is crucial for accurate claims. The 50% or 25% deductible ones should be appropriately categorized.
In conclusion, meticulous planning and understanding of tax regulations can help businesses make the most of their Christmas expenses while ensuring compliance. If you have further questions or need assistance, feel free to reach out.
