Blog & Resources
Are gifts to clients / customers tax deductible?
Generally speaking yes. If the gift is designed to:
1. Promote and / or advertise your business;
2. Generate goodwill between your business and your clients; and
3. Encourage future business opportunities.
Taxation Determination TD 2016 / 14, states that a tax payer who is carrying on a business is entitled to a deduction under section 8 -1 of the Income Tax Assessment Act 1997 (ITAA 1997) for a gift made in connection with the above.
However, please note that if the 'gift' is determined to be entertainment then according to Tax Determination 94/55 the expense would not be tax deductible. TD 94/55 states that entertainment is:
1. Usually delivered by way of food, drink or recreation.
2. Accommodation or travel in connection with providing entertainment;
3. Furthermore, entertainment may be determined in reference to:
- Timeliness: Entertainment occurs soon after the provision of the item of property; the usefulness of the property expires after consumption; and it was returned after use.
- Direct Connection: The entertainment should arise from the use of the property.
According to TD 94/55 the following items would not constitute entertainment: TV sets; computers; gardening equipment; wine; and bottled spirits.
However, these following items probably would: Providing glasses of champagne; hot meals; theatre tickets; holidays; accommodation; and hired entertainers.
If you would like to discuss further please contact us:
McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD
Phone +61 3 9428 1062
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