With Xmas coming up and staff gifts, meals out, client gifts cropping up I thought I would give a quick overview as to what you can and cannot claim for tax and/or GST purposes. There are a broad range of rules as to whether gifts are 50% claimable or 100% and if you are an employer gifting to staff, you have to watch out for FBT (Fringe Benefit Tax) rules.
FBT is a tax to ensure employees pay tax on all benefits given to them by employers. It is to stop Jo Bloggs choosing to give non-monetary items instead of cash to avoid paying PAYE for the employee. FBT is at a high rate (upto 49.25% of the benefit) so its a LOT worse than PAYE. There is a threshold though that is $300 per employee per quarter. With a maximum of $22,500 per year (not that any of my clients have this many employees that the full year maximum will apply). If you stay under this you are not subject to FBT. FBT is the reason we do not have the “free” house for farm workers anymore.
Any CASH given to employees as a gift, HAS to be taxed via the PAYE system. This does not come under FBT.
With the entertainment rules, if you have a staff Xmas Party or dinner out, all costs are only 50% deductible, (unless it is overseas!)
With gifts that are food or alcohol these are also only 50% deductible. Gifts of other descriptions, are 100% deductible, but then fall under the FBT rules again if given to staff dependent on value.
If you only claim 50% for a staff gift, this is NOT subject to the FBT rules. (But some exclusions do apply).
As you can see its a bit of a minefield and the answer can be tricky, if in doubt, as always, please ask!
As an aside, if you have a Xmas party for your team NOT within NZ, like FIJI (for example), the cost is 100% deductible! (But may then fall under FBT Rules) I am sure you could invite your Friendly bookkeeper/Accountant