Let us entertain you (but be aware of the tax treatment)

‘Tis the season for saying thanks to customers and staff, typically with gifts, wining, and dining. Refresh yourself on what the tax rules are if you plan on claiming the expenses.

Examples of where entertainment expenses are 50% deductible include:

• Taking customers, suppliers, and associates out for dinner or putting on a function for them
• The traditional staff Christmas party
• Shouting customers, suppliers, and staff to an event, like a sporting event or a show
• Taking them on a jaunt in your launch
• Giving them the use of your bach or time share apartment as a thank you

Instead of a Christmas party, you might give your employees restaurant vouchers to use at their discretion. This cost is fully deductible but is subject to fringe benefit tax (FBT), although there is an exemption of $300 per employee per quarter (a maximum exemption can apply). The same treatment applies to staff gifts (except for food and drink, e.g. wine), again fully deductible but subject to FBT under the ‘other benefits’ category.

Many firms pay their staff a Christmas cash bonus. These payments are classed as ‘extra emoluments’ and are fully deductible but have PAYE deducted at the employee’s marginal tax rate.

As a thank you gesture, many businesses give their customers gifts during the festive season. The cost is fully tax deductible as marketing and promotion expenditure.

If in doubt about where you stand, check with us.

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