TAX DEDUCTIONS ONENTERTAINMENT & GIFTSP A U L M A R T I N C H A R T E R E D A C C O U N T A N T

ENTERTAINMENTThere are rules andconditions when it comes totax deductions withChristmas parties, year-endfunctions and otherclient/customer or employeeentertainment expenses.Some entertainmentexpenses are fully deductible,while some are not.

TAX DEDUCTIONS

If your client/customer,employees or anyoneassociated with thebusiness has a greateropportunity to enjoy theentertainment than thegeneral public, you canonly deduct 50% of thecosts.

These includeentertainment expensesthat are supplied forcharity andentertainment enjoyedoutside New Zealand.

Taking your family orany relatives who do notwork in your companyout for dinner or for aholiday vacation withinor outside New Zealand.

50% 100% 0%

Examples of taxdeductions onentertainment

• Christmas drinks for team members orclients/customers in the office

• Christmas drinks for team members orclients/customers in the pub

• Hiring of a launch to entertainclients/customers

• Restaurants providing food and drinks toteam members at a social function in theirrestaurant

• Staff Christmas party on or off thebusiness premises

• Function hosted in a marquee at the races(or in a corporate box at the rugby).

Includes the cost of tickets and any foodand drink provided

• A weekend away for the team at holidayaccommodation in New Zealand, includingany food and drink provided

50%

Examples of taxdeductions onentertainment

• Donating food to aChristmas party in achildren's hospital

• Providingentertainment, includingfood and drink at yourpromotional stand forthe Cracker ChristmasFestival

• Holding the Christmasparty in Fiji

100%

REMEMBERTHIS

If you claim a 50%deduction for a businessentertainment expenseyou need to makenecessary GSTadjustments. Theseadjustments will berequired to be made at thetime your income taxreturn is filed.

GIFTSIf you are planning to giveyour employees, suppliers,clients/customers, orprospective clients/customersgifts this season, you need toknow that some gift items arenot fully tax deductible asthey are counted asentertainment expenditure.

Examples of taxdeductions ongifts

• Bottle of wine or sixpack of beer

• Meal voucher

• Basket of gourmet food

• Box ofchocolates/biscuits

• Christmas ham

50%

Examples of taxdeductions ongifts

• Calendar

• Book or gift voucher

• Tickets to a rugby game(but not corporate boxentertaining)

• Movie tickets

• Any presents that arenot food or drink

100%

REMEMBERTHIS

You may claim the full costof your employee gifts ifthey do not fall within thebusiness entertainmentrules. However, you mayhave to pay Fringe BenefitTax (FBT) if the costexceeds more than thegeneral employeeexemption and maximumemployer exemption.

This is just a quick guide to tax deductions ongifts and entertainment. If you are still unsure

about your holiday plans and expenses orwant advice on your specific circumstances,

we are a trusted team of charteredaccountants in Auckland that can help you.

PAUL MARTIN CHARTERED ACCOUNTANT

Call us today(09) 576 4166

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