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A Guide to Gifts for your Clients and Employees

Nov 29, 2023
three christmas gifts

As the festive season approaches, it's time for businesses to think about showing appreciation to clients and team members. However, did you know that the types of gifts you choose can have different implications for your business's tax deductions?

Understanding how to navigate the intricacies of tax deductions on gifts is crucial for smart financial planning. Whether it's a gourmet hamper for a client or a thoughtful book for an employee, knowing these rules can make a significant difference to your business's financial health.

Food or Drink

The rule of thumb with gifts is that if they consist of food or drink, you can only claim 50% of the expense as a tax deduction.

If you are giving out gift baskets or hampers and some of the contents are food or drink, but not all, the food or drink items are 50% deductible but the other gift items are 100% deductible.

When you come to claim the tax deduction, you will need to apportion the expense between the 100% deductible items and the 50% deductible items.

Gifts to Clients

If your Christmas giving includes gifts to clients, remember that some gifts will be fully deductible while others will be only 50% deductible. Use these examples as a guide.

50% deductible

  • Bottle of wine or six pack of beer
  • Meal voucher
  • Basket of gourmet food
  • Box of chocolates/biscuits
  • Christmas ham

100% deductible

  • Calendar
  • Book or gift voucher
  • Tickets to a rugby game (but not corporate box entertaining)
  • Movie tickets
  • Presents (not food or drink)

Fringe Benefit Tax (FBT) on Gifts

If you are giving gifts to your team you may also be liable for fringe benefits tax. There’s a $300 exemption from paying FBT per employee per quarter so if the value of the gift is less than $300 you may be exempt. However, if the value of total benefits for an employee goes over $300 for the quarter year (and provided the total value of all benefits doesn’t exceed $22,500 for the year), the full value of the benefits is subject to FBT.

Top Tip:

If you run out of time to organise Christmas gifts for customers, why not surprise them with a ‘Welcome back to work’ prezzie in the New Year?

Remember to keep your invoices and receipts for business entertainment expenses. If you have any questions about what’s deductible and non-deductible, give us a call on (06) 878 8824.

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