If you’re buying gifts for your staff or customers during the holiday season, it’s important to be aware that some of these expenses may qualify for tax deductions.

For staff gifts, the general rule is that gifts are fully deductible and exempt from Fringe Benefit Tax (FBT) if the total cost per staff member in one quarter is less than $300 (inclusive of GST). Non-entertainment expenditure such as gift vouchers, hampers, flowers, and wine qualify for this, with a total yearly cap of $22,500 for combined employee benefits.

Client gifts

50% deductible 100% deductible
  • Hamper with gourmet food
  • Box of chocolates or biscuits
  • Christmas ham
  • Bottle of wine
  • Presents (not food or drink)
  • Book or gift voucher
  • Movie tickets
  • Flowers
  • Tickets to a rugby game

Regarding entertainment, events that qualify as business-related and are only 50% deductible won’t incur FBT. So, if you’re hosting a social function for employees or taking a client out for a meal with expenses that are only 50% deductible, FBT does not apply.

Functions and events

50% deductible 100% deductible
  • Staff Christmas party on or off the business premises
  • Drinks for team members or clients at a bar
  • Taking clients or team members out for a meal
  • Providing a morning or afternoon tea for your team
  • Catering a team lunch in the office
  • Gifting restaurant vouchers to staff members
  • Donating to a Christmas party in a children’s hospital

Cash bonuses for staff should go through the payroll system, with PAYE and other applicable payroll taxes deducted. These bonuses are considered lump sum payments and are taxed at a flat rate based on the employee’s income range.

When it comes to client gifts, some are fully tax-deductible, while others are 50% deductible, particularly those involving food, drink, or entertainment. We’ve provided some common examples of deductible and non-deductible items below – get in touch with your Sidekick if you need any clarification.

Similarly, entertainment expenses, like client gifts, may be 50% or 100% tax-deductible. Examples, such as staff Christmas parties, meals with clients or team members, and charitable contributions, are categorized based on their deductibility.

Get in touch if you have any curly questions – we’re here to help!