The Christmas run-up can be frantic for business owners. Here’s what you need to know on claiming Christmas expenses correctly for parties, gifts, donations and more.
Throwing a Christmas party can be a great way to see out the year and celebrate successes, but there are tax considerations to think about.
You can claim some costs of a party. For example, you can claim half the costs that are food, drink or entertainment. General set up, venue hire etc is fully claimable.
Half your holiday party expenses may be claimed in your income tax return if the expenses relate to your business. GST may also be claimed – this would require a tax adjustment.
Generally, you can claim the costs of gifts as a business expense.If you were thinking of giving the gift of food, drink or entertainment (or vouchers for these), then only half the cost can be claimed so you may want to have a re-think.
You may need to separate out the costs if a gift contains food and drink, as well as other items, eg a hamper.
However keep in mind that gifts for employees may be subject to fringe benefit tax, which is paid on benefits workers get as a result of their employment.
The general rule of thumb is that FBT will be payable if the employer provides the 50% deductible entertainment and:
• the employee can choose when and where to enjoy the benefit, or the benefit is enjoyed outside of New Zealand, and
• the benefit is not provided in the course of, or as a necessary consequence of, the employee’s employment duties.
GIVING TO CHARITY
You can deduct 100% of the cost of entertainment you provide to members of the public for charitable purposes. For example, if your business donates food to a party at a hospital.
For the full entertainment expenses guide check out the IRD guidelines here.
Employees get a paid day off on public holidays if it's a working day for them. If they work on a public holiday they are paid time and a half, and may get an alternative day off. Some public holidays are Mondayised (or Tuesdayised) if they fall on a Saturday and/or Sunday. If the Saturday and/or Sunday are not days the employee would work, then they are entitled to recognise the public holidays on the Mondayised (or Tuesdayised) days, if they work these days. If the employee works all four days, then the public holidays are recognised on the days they actually fall, ie the Saturday and/or Sunday. Each employee can get a maximum of 11 public holidays a year, for example:
If a public holiday is Mondayised, they can’t claim two public holidays (ie one for the actual date and one for the Mondayised date)
An employee can’t be entitled to more than four public holidays over the Christmas and New Year period, regardless of their work pattern.
If the employee is usually based in Auckland, but is temporarily based in Wellington, the Anniversary Day to be observed is a matter to be agreed by the employer and the employee, but the employee can only claim one Anniversary Day per year. Both parties can agree to transfer the observance of the public holiday if they wish. If they cannot reach an agreement, then the employee is entitled to observe the anniversary of the province that they usually work in (Auckland, in this example). If they were to work on the day, they’d be paid time and a half, plus an alternative day.
Please contact Kristen if you need any assistance with calculating your holiday pay over the Christmas period.