Well it’s almost Christmas again and this year we thought we would do something different and write this newsletter as if it was coming from a deep dark cave where only Scrooge himself goes, although you may fondly recognise them as the IRD.  Christmas is not for fun and family entertainment, it is an opportunity for us (the IRD) to build up our ever falling tax revenues and catch you, the poor unsuspecting taxpayer when you least expect it!!!  So lets look at one of our favourites… 

Entertainment Tax
There are all sorts of rules but to cut to the chase because time is represented by falling tax revenues, provisions operate that only 50.0% of what you spend can only be claimed by way of a tax deduction.

There are some exemptions but these are unlikely to operate for Christmas functions, unless you and your employees elect to have your Christmas function outside New Zealand somewhere.

So What about the Following:

Staff Christmas Party
So you think you might lash out and have a real boomer Christmas party. Well you can BUT only 50.0% of what you spend on food, drink, music, hire of glassware etc will be deductible, the other 50.0% is not deductible for tax purposes and it doesn't matter whether the function is held on the actual business premise or in somebodies back shed, the rules are the same.

Christmas Lunch / Dinner for Colleagues
Well with the recession it has been a tough year, so you think you might entertain your staff with lunch at the local restaurant? Same rules apply; only 50.0% deductible.

Gift for a Staff Member / Colleague
A gift to any staff member will be caught by FBT however, the gift to a colleague which isn’t food or beverage will generally be deductible.

FBT Implications
The $200.00 exemption per employee per quarter or $15,000 per year only applies to gifts and prizes and subsidised or discounted good and services. Motor vehicles, insurance subsidised transport or low interest loans are all caught by the FBT regime.

Cash Bonuses For Staff
So you think that entertainment might becoming difficult or not have the deductible consequences you first thought, so you think I will pay my employees a bonus. These are also taxable to the employee and not only that but are taxed at the extra emolument rate which is:

 14.2 cents up to $14,000 pa  
 22.7 cents from $14,001 to $48,000 pa  
 34.7 cents from $48,000 to 70,000 pa

If you have any further questions, visit our website www.walshassociates.co.nz and make use of our e-Smart questions and answer section.

Office hours over the holiday period
We will be closing on Thursday 23 December 2010 and reopening on Monday 17 January 2011. 

Thanks to everyone for their support during the last year and we wish you and all your families a Merry Christmas and a Happy New Year.  We hope you enjoy a relaxing festive holiday and prosperous 2011!

Christmas Day and Boxing Day - Saturday 25 and Sunday 26 December
Recognised on Monday 27 and Tuesday 28 December 2010

New Years Day - Saturday 1 January and Sunday 2nd January 2011
Recognised on Monday 3 and Tuesday 4 January 2011

Calculators and Key Tax Dates
Need a calculator or want to know key tax dates?  Visit our website www.walshassociates.co.nz or click on one of the links below:

- income tax calculator
- mortgage calculator
- Kiwisaver calculator
- GST, FBT & RWT
- Provisional tax
- PAYE