It’s Christmas time! Lots of Kiwi businesses love to celebrate the holidays by giving gifts to their team and saying thanks to their customers. But before getting too carried away with presents and parties, it’s important to know how tax rules work around Christmas giving.
Gifts for Staff
Small gifts are usually fine: Non-cash gifts (like hampers, wine, or movie tickets) worth under $300 (including GST) per person per quarter are normally exempt from Fringe Benefit Tax (FBT).
Watch the total spend: Across all staff, the total can’t go over $22,500 per year without FBT consequences.
Cash gifts count as income: If you give staff cash or prepaid/prezzy cards, that money has to go through payroll, and PAYE tax must be taken out.
Staff Christmas Parties
Christmas parties are considered entertainment, and only 50% of the cost is tax deductible.
This includes things like food, drinks, and venue hire.
Transportation costs may also fall under entertainment rules.
If employees help pay for the party, subtract their share before applying the 50% rule.
Gifts for Clients
Whether you can claim a tax deduction depends on the type of gift. For example, food and drink gifts usually fall under the 50% entertainment rule, but things such as books, calendars and other non-food and drink items are 100% deductible.
Quick Reference Table
Scenario | Tax Treatment |
|---|---|
Staff gift under $300 (non-cash) | FBT exempt, 100% deductible |
Staff gift over $300 | FBT applies, 100% deductible |
Cash gift to staff | PAYE applies |
Staff Christmas party | 50% deductible (entertainment) |
Client gift (food/drink) | 50% deductible |
Client gift (non-food) | 100% deductible |
Final Thoughts
Christmas is all about giving—but it’s also smart to know the tax rules. A bit of planning can save your business from a surprise tax bill later on.
If you're unsure about specific scenarios, please get in contact with us and we can point you in the right direction.
