Each year we’re asked the same thing – Are client Christmas gifts tax deductible?
Furthermore, what gifts attract Fringe Benefits Tax? And where/how can I safely spend my money at Christmas time?
If you are considering giving some gifts to your clients for Christmas, rest assured that in most circumstances these will be deductible to your business. So you can pull out the stockings and get ready to spread some Christmas cheer!
There are a number of client Christmas gifts that are tax deductible. If the gifts are given with the intention of being a gesture of goodwill (in the hope of generating future income) they are fully tax deductible. This would also apply to referral sources. For example, if you were an electrician and received referrals from a local real estate agent, a gift to them would qualify as tax deductible.
This is a far more tax effective way of saying ‘thanks’ to your clients and any referral sources, as oppose to putting on a Christmas party.
Christmas Parties are unfortunately not tax deductible, as they are considered “entertainment”.
If you’d like to better understand if Fringe Benefits Tax applies to Christmas parties and staff gifts, you might like to read our following blog article – Christmas Party Tax Rules.
This is general information. We always recommend you seek advice for your individual situation from your advisor.