Christmas Gifts & Celebrations: What Can Your Business Claim?

The festive season is fast approaching, and while the thought of spreading some holiday cheer is exciting, it’s also a time when business owners are scratching their heads over what counts as a deductible business expense. 

Whether you’re planning a team celebration, sending gifts to clients, or keeping it low-key this year, it’s important to know the dos and don’ts when it comes to holiday spending.

Let’s talk about how you can enjoy the season without getting on the naughty list with the IRD!

Santa’s Guide to Business Expenses: What’s Claimable?

Before you start hitting the mall or adding to cart, here’s what you need to know about your festive expenses:

1. Client Gifts – The Nice List

Claimable: Business gifts for clients can often be claimed as a business expense. Think hampers, branded goodies, or even a bottle of wine. But here’s the catch—only 50% of the cost is deductible if it’s food, drink, or entertainment. 

 Non-Claimable: Cash or cash equivalents like gift vouchers aren't usually deductible.

2. Staff Gifts – Recognise Your Stars:

Claimable:  Small gifts like gift baskets, chocolates, or vouchers (under $300 per employee, per quarter) are usually tax-free for your staff and deductible for you. It’s a great way to say “thanks” without breaking the bank.

Non-Claimable: Larger or lavish gifts might be seen as a taxable fringe benefit, and you could end up paying FBT (Fringe Benefit Tax). So keep it thoughtful, not over the top.

3. The Kiwi Christmas Party – Cheers to Another Year!

Claimable: For many businesses it’s throwing an end-of-year bash is a time-honoured tradition. The good news is that 50% of your party costs are generally deductible. That includes food, drinks, venue hire, and entertainment. 

Non-Claimable: Full deductions don’t apply here, so don’t go splashing out on caviar and champagne expecting the tax man to cover it. Keep your spending in line with your budget, and you’ll stay on the right side of the ledger.

TAD’s Top Tips for a Merry (and Compliant) Christmas

Before you plan that big bash or splurge on gifts, make sure you’ve set a budget. Times have been tough, and every dollar counts. Recognising your team’s hard work doesn’t have to mean pouring your profits down the drain. A thoughtful gesture, whether a small gift or a simple afternoon tea, can go a long way in boosting morale without blowing the budget.

1. Check the Budget:

Before committing to gifts or parties, review your finances. Is there room for a little festive cheer? If not, small gestures can still have an impact.

2. Keep Records: 

Remember to keep all receipts, invoices, and details of who attended any celebrations. Documentation is key to claiming those expenses.

3. Consult Your Accountant: 

Not sure if your expense will pass the IRD test? Chat with us at TAD before you make any big decisions. We’re here to keep your holiday season merry and your books in order.

Celebrate Smart!

Keep your celebrations in check, know what you can and can’t claim, and make sure your end-of-year cheer doesn’t turn into next year’s financial headache.