Deductibility of gifts provided to clients

By 9 October, 2016News

We often get asked by clients how they can say thank you to their own clients.

Most clients know that lunches and dinners are not tax deductible but the ATO has confirmed that a taxpayer carrying on business is generally entitled to a deduction for expenses incurred on a gift made to a former or current client, if the gift is characterised as being made for the purpose of producing future assessable income.

However, the expense may not always be deductible (e.g., if the gift constitutes the provision of entertainment that is not deductible).  So for common examples, movie /sporting event tickets or dinner vouchers etc. are generally not tax deductible, but a pen, bottle of wine, perfume or flowers etc. are generally tax deductible. 

The ATO’s recent determination also highlights that a deduction will be denied where expenditure on gifts is more accurately described as being ‘private’ in nature (for example, where a gift is provided to a relative outside a business’ usual practice of providing client gifts).

Please call our office to clarify any questions you may have.