It’s that time of year again, and the season of giving is upon us. While the fun part is thinking about parties and presents, take a moment to remind yourself about the tax rules when giving gifts to clients. Some gifts will be fully deductible while others will be only 50% deductible.

If the gift includes food or drink – 50% deductible

The general rule of thumb is that if the gift consists of food or drink, you can only claim 50% of the expense as a tax deduction. If you’re 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, and 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)

If you’re unsure if your client gift(s) will be partially or fully tax deductible, give us a call and we can advise you.