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McLEAN AND CO.
Christmas Functions and Gifts- Tax Deductability
Taxing Lump Sums and Bonuses
Payments Due 15t January 2012 Can be Paid on the 16th
SEASONS GREETINGS AND OFFICE CLOSURE
Seasons Greetings- may you and your families have a merry Xmas and a happy and successful New Year
The office will be closed from Saturday December 31, 2011 to Tuesday 10 January, 2012.
CHRISTMAS FUNCTIONS AND GIFTS- TAX DEDUCTIBILITY
You may be able to claim tax deductions for your Christmas function or work gifts if they're for people who are part of the running of your business, such as employees, clients, suppliers or prospective clients and suppliers.
If you don't hold a function but give your employees some sort of entertainment (for example a voucher) that they can use at any time, then you may need to pay FBT (fringe benefit tax) on this, or only claim 50% of the cost.
Giving a gift that is not of an entertainment type would be fully deductible for tax purposes. But you may be liable for GST if the value exceeds $300.00 if they are to employees.
Some entertainment related gifts will be fully deductible. For example tickets to rugby world cup games. If you gave a client tickets for seats that are available to the general public the cost will be fully tax deductible. But if you hosted a client in a corporate box or gave tickets with access to a corporate box, or invited them to enjoy your hospitality in a marquee set up at the game venue, the costs (including food and drinks) will only be 50% tax deductible.
If you provide food or drink by taking a client out to a restaurant or bar, at a social gathering or business lunch, shouting your staff drinks in or away from the office, or paying for the staff Christmas party, the costs will only be 50% tax deductible.
If you give your staff food or drink and they can choose when to enjoy your generosity, the cost will be fully tax deductible but will fall within the FBT regime. But if the value of the food or drink (and other free or discounted goods and services) is less than $300 per employee for the quarter (and the total for all employees for the 12 months is not more than $22,500) no FBT will be payable on the gift.
TAXING LUMP SUMS AND BONUSES
Over the holiday season you may give your employees a bonus or lump sum payment. Lump sum payments can include annual or special bonuses, cashed-in annual leave, back pay and retiring or redundancy payments. Overtime or any regular payments aren't lump sum payments.
Follow these steps to find out what tax rate to use for a lump sum payment:
|Income bracket||Tax rate to use|
|$14,000 or less||12.54%|
|from $14,001 to $48,000||19.54%|
|from $48,001 to $70,000||32.04%|
|greater than $70,000, but less than the ACC earners' levy maximum threshold of $111,669 (for the 2012 tax year)||35.04%|
You can also apply PAYE at 35.04 cents in the dollar if the employee asks you to use this rate.
You don't pay ACC earners' levy on redundancy payments and retiring allowances. In this case you'll need to reduce the tax rate by 2.04%.
If you tax your employee using a secondary tax code (SB, S, SH or ST) then you'll need to use a different tax rate.
PAYMENTS DUE 15 JANUARY 2012 CAN BE PAID ON THE 16TH
Any payments due on 15 January 2012, which is a Sunday, can be made on Monday 16 January 2012.
Typical payments due on 15 January that can be paid on 16 January include:
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If we can assist further, please email McLean and Co as follows: