Xmas Expenses – Tax Deduction Guide
Santa is coming and so are those Xmas time business expenses. Begs the question – What about the tax? Can you deduct all of it? Some of it? Ooooh – maybe none of it? Well, you have come to the right place to find out!
Keep the HO HO HO from becoming an OH NO with our handy tax deduction guide filled with tips to make your money work for you this festive season.
STAFF XMAS PARTY/ ENTERTAINMENT
Yes! You can claim your end of year celebrations as business expenses. However, you may not be able to claim all of the costs, and they may also be subject to fringe benefit tax (FBT). FBT is a tax paid on benefits that workers receive as a result of their employment. Party expenses you can claim 50% of can include: Venue hire, food and drink, entertainment, or accommodation.
A general guide of 50% deductible expenses:
- Corporate boxes
- Tickets to events
- Hiring marquees and tents
- Holiday homes and timeshare apartments (although you can claim a deduction of 100% if using the accommodation is secondary to the business activities or employment duties. Contact us if you need help working this out)
- Hiring yachts, launches, or other recreational boats
- Food and drink consumed by staff (both onsite and offsite)
For a more comprehensive list, check out Inland Revenue’s business entertainment rules by following this link.
Yes! You can generally claim between 50-100% of the cost of staff presents, but you may need to pay FBT on such gifts. Keep in mind that there are thresholds, so you may avoid FBT if you only provide ‘minimal’ fringe benefits. For example, food and drinks and a local venue might be exempt because your team can’t choose when and where to enjoy that particular benefit.
Some 100% deductible gifts include:
- Books and gift vouchers (iTunes, store vouchers etc.)
- Tickets to an event or movie
- General presents (flowers, knick-knacks, clothing etc.)
Some 50% deductible gifts include:
- Alcohol (beer, wine, champagne etc.)
- Ham, biscuits, gourmet food hampers
- Meal vouchers
Remember, the current tax exemption figures are $300 per employee per quarter and $22,500 maximum employer exemption per annum. If you exceed the exemptions you will need to pay Fringe Benefit Tax on the total value of the benefits. To double check your tax obligations for gifts, you can consult the IRD’s detailed information about FBT and the Fringe Benefits Guide here.
‘Tis the season of giving, so if your business is looking to get amongst the community with charitable deeds this Xmas; donating gifts, food, or some form of entertainment – you can deduct 100% of the cost!
- Freebies/ giveaways promoting your business are 100% deductible
- Entertainment you provide to a publication for review of your business is 100% deductible
- Overseas entertainment is 100% deductible – Whoop! Take us to Mexico!
- Vehicle use – Is your employee planning to use a business vehicle for a private trip over the silly season? This will most likely be perceived as a fringe benefit, so will be subject to FBT charges.
The IRD guides are very clear and provide great examples of what is and is not tax deductible, and when you need to be paying FBT, so we recommend making use of them this season.
We are always happy to field your festive tax questions. In fact, we dare you to come up with one we can’t answer!