Are Staff Christmas Parties Tax Deductible in NZ?

‍Entertainment Expenses and the 50% Deduction Rule

Inland Revenue treats Christmas parties as entertainment expenses. This means they fall under the 50% deductibility rule. In other words, you can usually only claim half of the cost as a business expense.

This applies whether the party is held at your office, at a restaurant, or offsite at a venue. The reasoning is that food, drink, and entertainment provide both a private benefit to staff and a business benefit to the employer, so IRD splits the difference.‍

What Costs Are 50% Deductible?

The following expenses for a Christmas party are generally 50% deductible:

• Venue hire (if food and drink are involved)
• Catering and meals
• Alcohol and non-alcoholic drinks
• Entertainment such as music, performers, or activities

What About Gifts at a Christmas Party?

If you give staff Christmas gifts, the tax treatment depends on what the gift is:

• Food and drink gifts (e.g. wine, chocolates, hampers) fall under the same 50% rule.
• Gifts that include your branding such as cooler bags and clothing are 100% claimable as advertising/promotional products.
• Other gifts (e.g. vouchers, movie tickets, gift baskets without food or alcohol) are generally 100% deductible for income tax.

Be aware: gifts to staff may also fall under the fringe benefit tax (FBT) rules if they exceed certain thresholds. Reminder of the thresholds:

• $300 or less for each employee in a quarter (or $1,200 or less if you file annually) and
• your total unclassified benefits to all employees are $22,500 or less in last 4 quarters (or last income year if you file annually)‍

‍Examples:

• You spend $4,000 on a staff Christmas party at a local restaurant. You can deduct $2,000 (50%).
• You buy $1,000 worth of wine as staff gifts. You can deduct $500 (50%).
• You give $1,000 worth of movie vouchers as gifts. You can deduct the full $1,000.‍

Can I Deduct Travel Costs for Staff Parties?

If you’re paying for staff taxis, buses, or accommodation to and from the Christmas party, these usually fall under the 50% deductibility rule too.‍

Why It Matters

Understanding the tax rules around Christmas parties and staff gifts helps you:

• Budget correctly: Don’t assume everything is fully deductible.
• Avoid surprises: Be aware of FBT and entertainment rules.
• Maximise claims: Separate 50% deductible items from 100% deductible ones for better record keeping.‍

FAQs on Staff Christmas Party Tax Deductibility

Q: Is a staff Christmas party fully deductible if it’s held on-site at my office?
No. Even on-site celebrations with food and drink are still subject to the 50% rule.

Q: What if clients are invited to the party?
It doesn’t matter whether it’s staff, clients, or both. The 50% rule still applies.

Q: Do I need to keep receipts and records?
Yes. Keep invoices that show what was purchased, and separate costs for gifts versus entertainment if possible.

Final Word

So, are staff Christmas parties tax deductible in NZ? Yes, but only 50% of food, drink, venue, and entertainment costs can be claimed. Gifts may be fully deductible if they aren’t food or alcohol, but keep FBT in mind.

At Bring on Monday, we help businesses plan not just their year-end tax but also their staff rewards and benefits so they get the deductions they’re entitled to without overstepping the rules.

Planning a Christmas party this year? Let us help you structure it in the most tax-smart way so you can celebrate with your team while keeping IRD happy.