It’s nearly upon us – the time for presents, parties, and flying reindeer – and if you are forgoing your inner Scrooge and hosting a business party or giving gifts to your employees and customers this Christmas, we have a few ideas for tax deductions that might help that mince pie taste a little sweeter.
When treating your employees to a gift this Christmas, non-entertainment gifts with a value less than $300 per employee can qualify as a deductible expense and are not subject to fringe benefits tax (FBT). So gifts such as hampers, clothes, flowers, perfume and wine can all come flying down the chimney carrying some deductions with them.
Meanwhile, presents for customers, suppliers and volunteers are also a deductible expense as long as they are not overly valuable or excessive. The parameters for this are not clearly defined so exercise caution when purchasing these types of gifts and give us a shout for some advice.
If you are spreading the cheer and throwing a party this Christmas then an important factor to consider is whether the party involves any forms of entertainment. By entertainment, we don’t mean the quiet guy from the office giving an impromptu rendition of “Santa Baby” and then telling everyone how much he loves them. For tax purposes, entertainment is defined as:
If the party does not involve “entertainment”, it is a deductible expense.
Holding the Christmas party on the business premises on a working day is usually the most tax effective. Meanwhile, expenses such as food and drink (including alcohol) are exempt from FBT for employees, but no tax deduction or GST credit can be claimed. The rules for Christmas parties can be complex and we can give you a hand to work out what deductions you can claim.
Goodwill at this time of year can help to build business relationships and is an important factor to bear in mind when weighing up your plans. So while we can help you find smart ways to qualify for deductions, if some choices that build better rapport with customers result in non-deductible expenses, that might be worth more to you in the long run than the deduction. Merry Christmas!