It’s that time of year again.  If you are planning on holding a Christmas social, it pays to know the impact your event will have on your tax liability.  Most costs relating to a Christmas social for staff and/or customers will be 50% deductible under the limitation rules, and require a GST adjustment to limit the GST portion to 50% of the total GST on that expenditure.  Larger events which are open to the public are normally 100% deductible. There may also be potential FBT exposure in some cases.  Here is a quick summary.

 

The following events will normally be 50% tax deductible and require a GST adjustment:

• expenditure relating to socials held off premises for staff and/or customers
• expenditure related to socials held on business premises for staff and/or customers
• corporate boxes and any associated expenditure on food, drink etc
• accommodation in a holiday home or time-share apartment and any associated expenditure
• hireage of a pleasure craft and any associated expenditure

 

The following will normally be 100% tax deductible:

• light refreshments, provided to staff during the course of their normal employment, such as morning tea 
• light refreshments served at a business meeting 
• light refreshments served at an educational event such as a seminar or conference that lasts for at least four consecutive hours
• expenditure on an event that is open to the public and is for charitable purposes
• expenditure on an event or social that takes place off-shore

 

These events may give rise to Fringe Benefit Tax:

• expenditure on an event or social that takes place off-shore
• entertainment expenditure where employee(s) (including shareholder-employees) can choose to enjoy the entertainment at their discretion and outside of their employment
• FBT may also be payable on some travel costs where the business pays for entertainment-related travel

 

So, if you want to gain maximum tax benefits from your Christmas event, support a local charity!   You can’t argue with Inland Revenue’s rationale on that one.

 

The above information is current at the date of writing and is provided in general terms relevant to New Zealand only.  We do not accept responsibility or liability for its accuracy or for the outcomes that may result from placing reliance on this information.  If you have any queries about the tax implications of your business social, party or event, please feel free to contact me so I can take any subsequent legislative changes and your particular circumstances into account.

 

Amanda Imms CA

Principal

AJ Accounting Limited

ph. 021 771 557

amanda@ajaccounting.co.nz