As the holiday season draws closer, many workplaces will be having their annual Christmas parties and purchasing gifts for their staff and customers.
But did you know that just because the business is paying for the gift, it does not mean that a tax deduction is always allowed.
For customers and suppliers, only gifts that are "non entertainment" in nature are allowed as tax deductions. Examples of an entertainment gift are tickets to the movies, sporting events, holidays or even go karting. You are giving them an experience, not a physical gift.
However non entertainment gifts (i.e physical gifts, wine, Christmas hampers etc.) are all fair game and can be included a tax deduction for the business and as a GST credit.
However, things can get a little more complicated when the gift is for an employee.
For staff, the same rules apply for entertainment and non entertainment gifts, however, should the gift to staff be greater than $300, then the gift is then subject to Fringe Benefit Tax (payable at a rate of 49% on the grossed up value of the benefit).
Now should an entertainment gift over $300 be provided to an employee, FBT will apply, but in this case you can actually include the tax deduction.
Confusing? Don't worry, below we have included an easy to use table to sum up what you can and can't claim this holiday season.
As always, if you are unsure if your business can claim a particular expense this holiday season, contact us and we will let you know right away.
And on behalf of the whole team, we would like to wish you a Merry Christmas and Happy New Year.