The holiday season often brings extra expenses for businesses, but did you know some of these could be tax-deductible? Here’s a guide on what Christmas-related expenses you can claim.

Employee Gifts

Are fully deductible if the total cost is under $300 (including GST) per employee per quarter, such as gift vouchers, hampers, flowers, and wine. Anything above $300 might be considered a fringe benefit and subject to FBT.

Gifts that qualify for 50% deductible entertainment (e.g. social events) are not subject to FBT.

Cash Bonuses

Bonuses are subject to PAYE and must be processed through the payroll system, taxed based on the employee’s income range. 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.

Client Gifts

A gift to clients is deductible, however it must have a business connection. Be mindful of the GST component when gifting items or providing entertainment.

50% deductible: Food, drink, and other entertainment-related gifts (e.g., hampers, chocolates, wine).

100% deductible: Non-entertainment gifts like books, movie tickets, flowers, or sports tickets.

Vouchers

Vouchers for employees or clients are a popular choice, but remember, they need to be within the gifting threshold to avoid additional tax complications.

GST generally cannot be claimed at the time of purchase for general purpose vouchers such as Prezzy Cards, Petrol vouchers and Farmers, Noel Leeming, Supermarket gift vouchers.

Entertainment

Holiday parties or events for your team are deductible, as long as the event is work-related. Be mindful that staff parties (on or off-site), drinks at a bar, meals with clients or team members are 50% deductible.

Navigating the tax rules around Christmas giving can be challenging. If you need further guidance, feel free to reach out to us.