Gifts to staff – are they tax deductable or subject to FBT?

Christmas is a time where employers like to give gifts to their employees, in the spirit of the season. Along with this they also need to know -

  • Are these tax deductable expenses and -

  • are these subject to Fringe Benefit Tax?

Tax Deductibility:

Gifts can be categorised as Entertainment and Non-Entertainment.

Entertainment gifts include gifts such as theatre or movie tickets, sporting events, accommodation for holidays, flights, membership to a club or any similar items. These are not deductible for tax purposes. No GST is also claimable on such expenses.

Non-entertainment gifts are deductible for tax purposes. GST can also be claimed. Non-entertainment gifts may include gifts such as a Christmas hamper, bottles of wine or spirits, gift vouchers, flowers or other similar items.

It is therefore suggested that you give non-entertainment gifts to staff as they are beneficial from a tax perspective.

 

Fringe Benefit Tax:

The provision of a gift to an employee at Christmas time may be a minor benefit where the value of the gift is less than $300. These benefits are not subject to FBT.

Where a Christmas gift is provided to an employee at a Christmas party that is also provided by the employer, the benefits are associated benefits, but each benefit needs to be considered separately to determine if they are less than $300 (including GST) in value. If both the Christmas party and the gift are less than $300 (including GST) and the other conditions of a minor benefit are met, they will both be exempt benefits.

Minor benefit conditions:

  • Gifts are provided to staff or their associates (for example a spouse/family members),

  • Gifts are provided on an “infrequent” or “irregular” basis, and

  • the gift is not considered a reward for services.

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