A taxpayer who carries on a business is entitled to a deduction for a gift made to a former or current client if the gift has been made for the purpose of producing future assessable income i.e. gaining client referrals, generating additional sales, etc. Real estate agents for example normally give a bottle of champagne to both the vendor and purchaser of a property they sell. Why? As this goodwill jester creates futures referrals and sales commissions. 

The gift will not be deductible if it is of a capital nature, is made for private or personal reasons, relates to the gaining of exempt income or non-assessable income, or another provision of the income tax law prevents it from being deductible (i.e. the gift is entertainment or a bribe of foreign or public officials). For example, if a business owner gives their brother or spouse a bottle of champagne that will be for private purposes and non-deductible.

Tax deductible gifts include:

  • A coffee machine.
  • Books or novels.
  • Flowers or chocolates.
  • Christmas or gift hamper.
  • Bottle of wine, spirits or liqueur.
  • A bottle of perfume or aftershave.
  • Vouchers for retailers e.g. David Jones, Myers, Jack London, etc.
  • Watch.
  • iPad’, phones, tablet computers, etc.
  • Handbags or wallets.