Christmas Tax Write-Offs in New Zealand:
Tax Implications Related To Employees/Client Gifts
Christmas is here and more than anything, it's usually referred to as the season of love. Love is expressed by giving and many employers hope to express this love to their employees, by giving gifts. If you aim to show them love and help them keep their jobs after the holidays, you might need to take a step back and think about the tax implications of your gifts.
Gifts could be in the form of actual items, vouchers or even organizing a get-together for them. This article is not advising you against giving; we are only concerned about ensuring you don’t get on the bad side of the IRD.
Are you shocked that you could get into trouble for your giving or just wondering what could get you into trouble? Well, we’ve got you.
Pay attention to the following:
Tax implication on gifts
When it comes to gifts, you have to be careful with how much you’re spending per employee because there’s a point at which you get to pay a fringe benefits tax (FBT). That threshold is $300 for each employee per quarter or $22,500 in total on all your employees per annum for “unclassified” benefits (under which Christmas gifts fall). We advise that you approach gifting per head, as you could be getting a particular employee a particular item throughout the year (an item you’re not getting the others—which fall under unclassified benefits). If you go above the threshold, you’d have to pay fringe benefits tax on that employee. To avoid paying fringe benefit tax, such an employee may not get the same kinds of gifts others get at Christmas. Staff discounts also fall under unclassified benefits, so you have to be careful not to go over the threshold when it comes to giving at Christmas. The threshold applies only to gifts in the form of items as food bags, tickets, and the likes. When it comes to cash gifts, taxes apply. It is also important to note that with gifts, fringe benefit taxes apply whenever you give your employees gifts they can choose to enjoy whenever they like. For instance, a bottle of expensive scotch that can be enjoyed at home would require FBT to be paid. However, if they take it on the spot, no FBT needs to be paid.
Tax on throwing Parties and other events
This is a part many people miss out on, for lack of information. You can claim up to 50% of the cost of the venue of your party, holiday home accommodation (in the case of an event), use of a corporate yacht, food at a restaurant and every other cost that has to do with entertainment at these parties and events. Note that the venue of the party must be off the premises of your office to enjoy these benefits.
During your parties, ensure your employees are careful not to do anything that attracts fines.
Whatever you do, you’ve got to be careful with ensuring you do not get entangled with giving gifts in ways that would cost you trouble with IRD during the Christmas holidays. You have to play by the rules to ensure you can resume work peacefully, following the holidays. In complicated cases, consult experts or tax lawyers to ensure you’re on track with the law and stay out of trouble.
Enjoy a trouble-free holiday!