robyn pearson



october, 2003

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The year has flown and Christmas is just around the corner.
If you are in business you might be considering the tax deductibility of some of those Christmas expenses. Most businesses host a party for their staff, and this can mean a large party where partners are also invited, or just lunch at a restaurant for staff members.

What should we consider when we are accounting for Christmas activities and gifts?

Jenny Brown, of Brown’s Gourmet Cellar, consulted me on this matter the other day.

“We are giving our staff members a gourmet hamper this year,” said Jenny. “It will be from stock in the shop naturally. We are also hosting a Christmas wine tasting instead of the staff party. This will be publicised in the Weekender, and will be open to everyone. Can you please tell us what is claimable and what is not?”

“No problem, Jenny,” I replied. “The Christmas wine tasting for the public will be fully tax deductible. The effect of course would have been different if you had issued invitations to your customers personally. This would then mean that you are providing a form of entertainment and as such this would not have been tax deductible. On that occasion, benefits provided to your employees would have been subject to fringe benefits tax.”
“As we have discussed before, when you take your employees and their associates to lunch or to a staff Christmas Party, the cost of their meals are subject to fringe benefits tax and tax deductible, and the cost of meals for other non related people, are not tax deductible.”

“In respect of the gifts to staff, they are normally what you sell in the business, and are less than the $500 threshold where fringe benefits tax would apply. As such there is no FBT and are tax deductible. The $500 threshold would apply to all provisions for the year.

“Thank you once again,” said Jenny. “We appreciate your valuable advice before we enter into these transactions.”



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Last modified: 03/04/2014