The Festive Season | Important Tax and Holiday Pay Topics
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.
The issue of public holiday pay for employees, including who is
entitled to what rate and the impact of any leave, is a complex
one for employers.
• Public holiday payment
• Working on public holiday
• Employee entitlements
• Paid leave on public holiday
Please contact Kristen if you need any assistance with calculating your holiday pay over the Christmas period.