Parties and gifts are all part of the festive fun, but they can cost a small fortune. And it’s not always easy to understand the rules around entertainment expenses so you know what’s deductible and non-deductible before you fork out for your staff and customers.

Gifts, bonuses, parties, and more: here’s a brief breakdown of what you can and can’t claim this festive season.

Employee gifts

Gifts that are not subject to the entertainment tax rules (vouchers, hampers, flowers) are fully deductible and exempt from Fringe Benefit Tax (FBT) if they cost less than $300 per employee per quarter, and the total for all staff stays below $22,500 a year.

However, gifts that do fall under the entertainment tax rules, like food hampers or wine, or taking your team to a show or event, are 50% deductible, and not liable for FBT.

Cash bonuses

Bonuses are classed as income, so PAYE and other payroll taxes apply. These ‘lump sum’ payments are taxed at a flat rate based on your employee’s income bracket.

Client gifts

Food, drink, or entertainment gifts are 50% deductible. Other gifts (flowers, movie tickets, a book) are 100% deductible

Workplace events

Christmas parties, client dinners, or team drinks are 50% deductible, while morning teas, office lunches, and charitable donations are fully deductible.

Remember: GST adjustments apply for entertainment expenses that are 50% deductible.

Make sure you keep all your invoices and receipts for business entertainment expenses. Not sure where your Christmas spending fits? Give us a call.