No matter how well you’ve planned in advance of the Christmas flurry or whether you’re still taking care of last-minute items, be aware of what you can claim tax deductions for, or where you might be liable for tax.
Here are some answers to common tax questions at this time of year.
Is our Christmas work party tax deductible? Does it matter whether it is held on business premises?
Expenditure on entertainment is only 50% deductible for tax purposes. This applies to deductions for spending on food and drink or celebration meals, whether they are on or off premises. There are exceptions — light refreshments for employees, such as afternoon tea, are fully tax deductible.
How about hiring items for a Christmas party?
The 50% tax limitation applies to any expenditure on hiring wait staff, crockery, glassware, utensils, furniture, music, or entertainment associated with a Christmas party.
If I take my clients or staff out for Christmas lunch, is it tax deductible?
The cost of taking colleagues out for an end-of-year lunch or dinner would be 50% tax deductible.
Are my gifts to staff and clients tax deductible?
The cost of gifts other than food or drinks is generally tax deductible. If you buy food, drinks, or even supermarket vouchers, this expense is only 50% deductible.
Remember, gifts to staff must be under $300 per quarter (including GST) to be fully tax deductible. If the cost exceeds this amount, or if total gifts or discounted services to staff for the year exceed $22,500 FBT will be payable to Inland Revenue. In this instance, costs can still be claimed.
What is the tax treatment of cash bonuses for staff?
PAYE must be paid on cash bonuses and included in the employee's wages for the week.
Give us a call if you have any tax questions in the lead-up to Christmas. We're here to help!