Can I give a Christmas gift to my employees and clients?
A very common question at this time of the year! It applies to all gifts, not just for Christmas.
As long as you don’t provide any single employee with a gift worth more than $300 between October and December, the costs are 100% deductible. However…if the gift is food and/or drink, then only 50% can be claimed.
If you’re gifting vouchers, GST cannot be claimed on the purchase price. The 50% rule applies here too – if the vouchers relate to food/drink, you can only deduct 50%.
For gifts to clients, the rules are exactly the same as above, except there is no set dollar value.
This sounds really complicated!
You don’t need to make any adjustments at your end for GST or splitting out non-entertainment – your accountant will do that when the financial statements are prepared.
Why the limit of $300?
This is set by the IRD. Anything more than $300 per quarter is captured by the FBT regime (Fringe Benefit Tax). You really don’t want to go there…