Accounting & Tax on Christmas Presents

Hamish Mexted Reducing Tax

It’s getting to that time of year again, and if you’re like us you haven’t bought Christmas presents for family yet let alone staff. It’s also the time of year that the Chartered Accountant comes out in us and we start to look at the accounting and tax on Christmas presents.

Tax on staff Christmas presents
Non-cash goods/services provided to your staff (like Christmas hams) are dealt with under the Fringe Benefit Tax (FBT) rules.  This will whack you at up to 49.25% of the value of the present (so, if you spend $1,000, you’re looking at a tax bill of $492.50.

However…the “kind” folk at the IRD have given us a “de minimis” or “small fry, wink wink” exemption. Generally speaking, the small fry wink wink exemption gives you $300 per quarter to spend on employee gifts. This means you can spend up to $300 per staff member on Christmas presents and not need to worry about tax.

As you’d expect, there’s a number of criteria you’ve got to satisfy to be able to claim the small fry wink wink exemption. Please contact us first before buying that Christmas ham and we’ll talk you through them.

Food & Wine
The usual entertainment rules apply for Christmas lunches, staff parties and dinners out. This means that if you’re pulling out the Bollinger at your Christmas lunch you can only claim 50% of the expense for tax and GST.

Functions & Activities
Looking to take your staff out to an activity like 10-pin bowling, quad-biking or to the movies? So long as there’s no food or drink involved then we’re happy for you to claim it (subject to checking with us first).

That’s us signing off for now. For the time being, if you’d like to find out more from Wellington based Chartered Accountants then contact Hamish Mexted at iif Chartered Accountants on 04 212 4977.