Giving gifts to clients (think about the tax)

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
- 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.