Are you planning a Christmas event for your clients? Is gift-giving on your to-do list? Take a minute to refresh yourself on how much is deductible as a business-related expense.
Presents
If gifts consist of food or drink, you can only claim 50% of the expense as a tax deduction. If gift baskets or hampers contain some food or drink and some other goodies, the food or drink items are 50% deductible, but other gift items are 100% deductible.
Note that when you claim the tax deduction, you need to apportion the expense between the 100% deductible items and the 50% deductible items.
Parties
The basics: an expense is business-related if you spend the money to help your business earn income. Business-related expenses are generally fully deductible.
If the expense does not help your business earn gross income, it is a private expense, not claimable as a deduction. Purely promotional events put your brand out there and are a marketing expense for the business. But entertainment events such as Christmas parties inhabit a grey area sometimes and may be limited to a 50% deduction.
You will need to make a GST adjustment for any entertainment expenses which are 50% deductible. This will be required when your income tax return is filed. Your Accountant can help with this.
Talk to us about your plans and we can advise you on the tax implications.
