Chartered Accountants Auckland

Tax smart client & staff gifts

December 1st, 2011 | Posted by Wendy Simpson-Fox in Claiming Business expenses | Fringe Benefit Tax | Gift

GiftWith New Zealand ranked as one of the most giving nations in the World you’d be forgiven for thinking that our tax laws encourage such generosity.  Instead, the rules around business gifts are tricky and mean that every time you give a gift you have to work out whether it goes in your staff wages return, needs Fringe Benefit Tax paid on it or if you’ll only get a tax deduction for half the gift (entertainment).

Ridiculous isn’t it, so to help you out here’s what you need to know about a few common client and staff gifts:

Cash Gifts …. 100% deductible if:

Who doesn’t love getting an unexpected wad of cash and if that’s what you’re giving your staff just remember to take tax off first and be extra careful calculating the tax because PAYE on annual bonuses and lump-sum-payments is done a little differently.  Giving cash to anyone else, you do business with like a client, is also fully deductible if you’re bolshy enough to ask for a Tax Invoice in return.  Otherwise a customer discount is probably an easier way to go despite not having the same ‘wow’ factor.

Yummy stuff … 50% deductible for clients or 100% deductible for Staff with FBT:

Giving edible gifts to clients will win fans (unless it’s past its Use-By date) and you’ll get a 50% claim.  For more info click through to our article on Christmas Parties and the Taxman.  On the other hand, giving food or drink to your staff to enjoy whenever they choose, including restaurant vouchers, will be fully deductible but you’ll  have to pay Fringe Benefit Tax (FBT) unless you’re under the  exemption thresholds (generally $300 quarter per employee).

Gift Hampers:

Treats of food and drink bundled up in Hampers are the same so you’ll get a 50% claim or you’ll need to pay FBT.  Watch out if the Hamper also includes some non-food gifts (like an ugly festive Tee-Towel for instance) because you’ll generally get a full tax deduction for those meaning it’s well worth totting up what that stuff costs you.

Books, CD’s, Movie Tickets & Vouchers (except food/drink Vouchers) … fully deductible & with FBT for staff:

Other sorts of gifts are generally fully deductible (as marketing and promotion) for anyone you do business with, except your staff.  With staff you’ll get  a full deduction if you pay FBT on the gifts or if you’re under the FBT exempt thresholds.

Checking your FBT obligations is complex stuff so that’s where we come in and asking us a Quick-Question is worry-free at $25 a pop.

Disclaimer: This publication has been carefully prepared but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation. This article must be read in accordance with our disclaimer and terms of engagement.

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