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Giving gifts to clients (think about the tax)

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The season of giving is on us. While the fun part is thinking about parties and presents, take a moment to remind yourself about the tax rules.

If your Christmas giving includes gifts to clients, remember that some gifts will be fully deductible while others will be only 50% deductible.

The rule of thumb with gifts is that if they consist of food or drink, you can only claim 50% of the expense as a tax deduction. If you are giving out gift baskets or hampers and some of the contents are food or drink, but not all, the food or drink items are 50% deductible, but the other gift items are 100% deductible. When you come to claim the tax deduction, you will need to apportion the expense between the 100% deductible items and the 50% deductible items. And you will need to make a GST adjustment for expenses which are 50% deductible.

Examples of gifts which are 50% deductible include:

  • Bottle of wine or six pack of beer
  • Meal voucher Book or gift voucher
  • Basket of gourmet food
  • Box of chocolates/biscuits
  • Christmas ham

Examples of gifts which are 100% deductible include:

  • Calendars
  • Book or gift vouchers
  • Tickets to a rugby game (but not corporate box entertaining)
  • Movie tickets
  • Presents (but not food or drink)

Call us if you’d like to check the tax treatment of your plans for this season’s gift-giving.

Download the guide to client gift expenses & tax deductibility

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