Christmas is all about winding down, saying thanks, and celebrating your team. But when it comes to tax, it’s not quite as simple as “whack it on the card and claim it.”
We get loads of questions at this time of year about what you can (and can’t) claim in relation to staff parties, gifts, and bonuses.
So here’s your quick, plain-English guide to those tricky Christmas themed tax questions.
Can I claim our Christmas party?
Yes, but only half of it. Food and booze at your Christmas bash are 50% deductible, whether you’re at the office, a restaurant, or Dave’s backyard.
The one exception: casual stuff like morning tea or a sausage sizzle for the team. That’s usually fully deductible.
Keep your receipts and note down who was there. Future you will thank you when it’s time to sort it in Xero.
What about the other party stuff (tables, DJ, hired glassware)?
Same 50% rule applies. If it’s there to make the party happen (wait staff, music, furniture hire), you can only claim half.
Basically, if it’s part of the festivities, it’s only partly deductible.
Can I claim a Christmas lunch with staff or clients?
Sure can… but again, only 50%. Meals and drinks are classed as entertainment, which IRD sees as part work, part personal.
When you’re coding these in Xero, make sure you’re using your “Entertainment 50%” codes. We’ve got a cheat sheet in our free download below if you need it.
Are gifts for staff or customers deductible?
Mostly, yes but there are some catches.
- Non-food gifts (vouchers, hampers, plants, that sort of thing) are fully deductible
- Food and drink gifts, including supermarket vouchers, are only 50% deductible
💡 Sidekick tip: Keep tabs on what you’re spending. If you spend over $300 per person per quarter on staff gifts, or more than $22,500 total for the year, you’ll trigger Fringe Benefit Tax.
Can I pay staff a transport allowance when the buses aren’t running?
You can, and it’s usually deductible for the business. Whether your staff member pays tax on it depends.
If you’re just covering the extra cost of getting to work because public transport’s off, most of it is tax-free, except the first $5, which needs PAYE. Anything beyond reasonable travel costs is taxable.
💡 Sidekick tip: Estimate extra travel costs fairly and document your reasoning. It keeps both you and your team above board.
What about Christmas bonuses?
No magic loopholes here. Cash bonuses are taxable income. They go through payroll, PAYE gets deducted, and they show up in your employee’s pay for that week.
Wrapping it all up (pun intended)
Christmas spending doesn’t have to be complicated, but it does pay to get it right.
We’ve pulled together a free Expenses Guide with Xero codes that’ll make your accountant’s life (and yours) way easier.
Download our free Expenses Guide →
