Keeping the taxman out of your Christmas hamper
Christmas is expensive enough. Here’s some of the key ways tax impacts on your Christmas spirit.
Who can claim the deduction for charitable gifts?
Giving a goat, funding a village well, buying a toilet, or farming equipment for people in third world countries is a common gift, particularly for those that just don’t need anything. But who gets the tax benefit? Assuming the charity is a deductible gift recipient (DGR), the answer is, who ever’s name is on the receipt.
If you buy any form of merchandise for the ‘donation’ – biscuits, teddies, balls or you buy something at an auction – then it’s generally not deductible. Your donation needs to be a gift, not an exchange for something material. At Christmas, most charities work on the basis that you are donating an amount equivalent to say a goat rather than actually giving a goat, so the donation will be deductible.
Giving to your team
Christmas celebrations at your work on a working day are likely to be exempt from FBT.
Keep the cost of your celebrations per person below $300 to make sure the event is a minor benefit for FBT purposes and exempt from FBT (including meals, beverages, entertainment, etc.,).
Keep any Christmas presents below $300 per person and ensure they are ‘one-off’ gifts. They need to be ad hoc to be exempt from FBT.
You can’t deduct the cost of your Christmas celebrations for team members unless FBT applies.
Clients and Christmas
Entertaining your clients at Christmas is not tax deductible (sorry).
Give a gift instead – gifts are deductible as long as the gift is given by the business with the expectation that the business will benefit (i.e., the gift is given with the expectation of generating revenue).