Christmas Parties, Presents and Tax
Christmas spending can feel simple in the moment. Book the venue, buy the hampers, load up the gift cards, thank the people who helped your business through the year.
The tax side is less festive, but it is worth checking before the invoices start rolling in. Some costs are fully deductible, some are only 50% deductible, and some staff gifts can trigger fringe benefit tax if they push you over the limits.
This guide covers the main New Zealand tax points for Christmas parties and presents, so you can plan with fewer surprises.
Christmas parties, presents and Tax:
Start with the business purpose
The basic tax rule is straightforward. If you spend money to help your business earn income, the cost is usually a business expense.
That is why a purely promotional event can be treated differently from a social Christmas function. If the event is designed to promote the business, attract customers, or put your products and services in front of people, it is generally a marketing cost.
A Christmas party is different. Even when it supports your team culture or client relationships, it also has a private or social element. Inland Revenue treats entertainment costs more tightly, especially when food and drink are involved.
The key question is not just “was this for the business?” It is also “was this entertainment, food, drink, or a staff benefit?”
Christmas parties are usually only 50% deductible
If you hold a Christmas party for your team, clients, or business contacts, the food and drink costs at that social event are usually 50% deductible.
That applies whether the event is held:
at your own premises
at a restaurant, bar, or venue
at an off-site activity
at a catered function
If the main nature of the event is social entertainment, the 50% limit applies.
Light refreshments are treated differently
There is an exception for light refreshments. Morning teas, afternoon teas, and similar simple refreshments are generally fully deductible.
For example, if you provide coffee, tea, soft drinks, fruit, or a plate of biscuits for a short staff thank-you morning tea, that is different from hosting a full Christmas lunch with food and alcohol.
The line can sometimes come down to the nature of the event. A casual morning tea is not the same as a catered Christmas function.
Staff contributions reduce the claim
If staff pay towards the cost of the party, your expense claim is reduced by the amount they contribute.
For example, if the total venue and catering cost is $2,000 and staff contribute $400, the business cost is $1,600. If the event falls under the 50% entertainment rule, the deductible amount would be based on that net cost.
Keep a clear record of:
the total cost
any staff contributions
what the event included
who attended
the invoice or receipt
Good records make the tax treatment much easier to confirm later.
Client gifts need to be split carefully
Client gifts are common at Christmas, but the deduction depends on what you give.
If the gift is food or drink, such as wine, chocolates, craft beer, gourmet treats, or a Christmas hamper, the cost is usually 50% deductible.
If the gift is not food or drink, it is generally fully deductible, provided it is a genuine business gift. Examples might include branded merchandise, books, flowers, plants, or small practical items.
Mixed gift baskets need a split
Gift hampers often include both food and non-food items. That means the cost should be split.
Gift item | Tax treatment |
Bottle of wine | 50% deductible |
Chocolates or biscuits | 50% deductible |
Coffee beans or tea | 50% deductible |
Candle, notebook, or reusable bottle | Usually fully deductible |
Packaging and delivery | Depends on the nature of the gift and how it is charged |
If your supplier provides an itemised invoice, keep it. If not, note what was included in the hamper and estimate the split as reasonably as possible.
A practical tip: do not code all your hampers to one account without checking what is inside!
Staff gifts can trigger fringe benefit tax
Small gifts for staff can usually be given without extra tax, provided you stay within the fringe benefit tax exemption limits.
For unclassified fringe benefits, the key limits are:
Limit | Amount |
Per employee per quarter | $300 |
Per employee per year, if you file annually | $1,200 |
Total for all employees across the year | $22,500 |
These limits cover more than just Christmas gifts. They can include other staff benefits during the year, such as:
birthday gifts
farewell gifts
staff discounts
vouchers or gift cards
other small non-cash benefits
This is where businesses often get caught. A $100 Christmas gift card may look safely under the limit, but it still counts alongside other benefits already provided during the quarter or year.
If you exceed either limit, fringe benefit tax may apply to all of the gifts, not just the amount over the limit.
Gift cards are not the same as cash bonuses
Gift cards can fall within the staff gift rules, subject to the limits above.
A cash bonus is different. Cash paid to an employee is treated as wages. It must go through payroll, with PAYE and any other usual payroll obligations handled as normal.
If you want to give staff a Christmas thank-you, decide early whether it will be:
a non-cash gift
a gift card or voucher
a payroll bonus
a team event
a mix of the above
Each option can have a different tax result.
Do not forget GST
If your business is GST registered, the GST treatment should match the nature of the expense.
As a general guide, if an entertainment expense is only 50% deductible, the GST claim is also commonly limited to 50%. That means you should avoid automatically claiming all of the GST on Christmas party invoices without checking the entertainment rules.
For client gifts, GST can also depend on whether the item is fully deductible or partly deductible. A hamper with food, drink, and non-food items may need the GST split in the same way as the income tax deduction.
For staff gifts, GST and FBT can interact, so it is sensible to check the treatment before making larger purchases or buying vouchers in bulk.
This content is general information for New Zealand businesses and is not personal tax advice. The right treatment can change depending on the exact expense, invoice, and wider benefits provided during the year.
A quick planning checklist before you spend
Before booking the party or buying gifts, run through these checks:
Is the event promotional, social, or both?
Will food and drink be provided?
Is the cost likely to be fully deductible or 50% deductible?
Are staff contributing to the cost?
Are client gifts food, drink, non-food items, or mixed hampers?
Have staff already received gifts or benefits this quarter?
Will any staff gift limits be exceeded?
Is a planned payment really a gift, or is it a cash bonus?
Have you kept invoices and item details for GST and tax records?
The aim is not to take the fun out of Christmas. It is to avoid an unexpected tax bill after the decorations come down.
A little planning now can make your Christmas spending cleaner, clearer, and easier to claim. Keep the records, split mixed costs properly, and check the staff gift limits before buying. Then you can thank your team and clients with confidence.
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