The Season for Gifts and Bonuses

Entertainment Expenses

When you're spending money on entertainment for your business, the tax rules can be a bit of a juggling act. Here's the scoop:

• 50% Deductible Entertainment: If you're entertaining clients or staff and there's a mix of business and pleasure, like a dinner meeting, you can usually only claim 50% of those costs as a tax deduction. This is because there's a private benefit involved as well.

• 100% Deductible Entertainment: Some entertainment expenses are fully deductible. For example, if you're providing meals for employees while they're travelling for work, you can claim the full cost. Also, if you're hosting a public event to promote your business and everyone, including the public, has the same access as your employees, you can deduct the full cost.

These rules are designed to ensure that businesses can claim deductions for genuine business-related entertainment, while also recognising the private benefit that might come with some of these expenses.

Bonuses

The holiday season is a time for giving, and many businesses like to spread a little cheer with Christmas bonuses. But what about the tax side of things? That's where your trusty payroll system comes in, making the whole process as smooth as a sleigh ride.

• Keeping Tax Calculations on Track

When it comes to bonuses, the taxman treats them just like regular income. But don't worry—your payroll system has got this covered. It's set up with the latest tax rates and knows exactly how to handle the "extra pay" method. This means it can figure out the right amount of tax to deduct, so you don't have to.

• Handling KiwiSaver and Other Deductions

If your employees are part of KiwiSaver, the system automatically takes care of those contributions. It also checks if there are any student loan repayments needed. This way, all the necessary deductions are sorted without you lifting a finger.

So, as you plan those festive bonuses, rest easy knowing your payroll system is working hard behind the scenes to keep everything running smoothly. Happy holiday!

Gift Vouchers

Thinking of giving your team gift vouchers for Christmas? It's a great way to show appreciation, but let us fill you in on the tax side of things:

• Fringe Benefit Tax (FBT): When you give gift vouchers to your employees, they’re usually seen as a fringe benefit. This means you might need to pay Fringe Benefit Tax on them. Basically, the value of the voucher gets added to your FBT calculations.

• Small Gifts Exemption: There’s a handy little rule called the "de minimis" exemption. If the total value of all small gifts (like vouchers) you give to an employee is under $300 in a quarter, you might not have to pay FBT on them. Just keep in mind, there’s also a $22,500 cap for all employees over the year.

• Keep Track: Make sure you keep good records of all the vouchers and gifts you hand out. This helps you figure out if you can use the small gifts exemption and makes FBT calculations easier.

• Tax Deduction: The good news? The cost of these vouchers is usually tax-deductible for your business, since it’s an employee-related expense.

By keeping these points in mind, you can spread some holiday cheer without any tax surprises. If you have any questions, just let us know!