With Christmas just around the corner, many Business owners start thinking about ways to thank their employee’s for their hard work during the year.
Common queries we are asked at this time of the year are ways to provide gifts to employee’s that are tax effective to both the business and employees.
An obvious choice for business owners is always the office Christmas party. The cost of the party however is regarded as Entertainment expenditure and is not tax deductible to the business (under the “minor benefits” exemption) unless the cost per person is > $300 (in which case FBT is also payable at the rate of 49% on the grossed-up value of the benefit).
A tax effective option for saying thank-you to your Employee’s is to give a “non-entertainment” gift that costs less than $300 (including GST).
These gifts are fully tax deductible and no FBT is payable where the gift is less than $300 and includes items such as a bottle of Alcohol, Gift Voucher, Christmas Hamper, perfumes, pen sets etc. The $300 limit applies separately to gifts provided to associates such as spouses.
Providing “entertainment” gifts to employee’s (such as tickets to the theatre, movie, sporting events, holidays etc) is not quite as tax effective in that that if it is less than $300, while you won’t have to pay FBT, you also won’t get a tax deduction or the ability to claim back the GST credit.
The rules for provision of gifts to clients or suppliers are slightly different. Entertainment gifts provided to clients are not subject to FBT (no matter the value) and you are not able to claim a deduction or a GST credit. Non-entertainment gifts provided to clients are never subject to FBT and a tax deduction and GST credit is allowed.
A summary of the FBT & Tax consequences is included below:
| Gifts to Employee’s |
FBT Payable |
Tax Deduction Available |
GST Credit allowed |
| Non-Entertainment Gifts such as Bottle of Wine, Christmas Hamper, Flowers, pen etc (< $300) |
No |
Yes |
Yes |
| Non-Entertainment Gifts > $300 |
Yes |
Yes |
Yes |
| Entertainment Gift such as tickets to Theatre, movie, sporting Event, holiday etc (<$300) |
No |
No |
No |
| Entertainment Gifts > $300 |
Yes |
Yes |
Yes |
| Gifts to Clients, Contractors, Suppliers |
FBT Payable |
Tax Deduction Available |
GST Credit allowed |
| Non-Entertainment Gifts such as Bottle of Wine, Christmas Hamper, Flowers, pen etc (< $300) |
No |
Yes |
Yes |
| Non-Entertainment Gifts > $300 |
No |
Yes |
Yes |
| Entertainment Gift such as tickets to Theatre, movie, sporting Event, holiday etc (<$300) |
No |
No |
No |
| Entertainment Gifts > $300 |
No |
No |
No |
Office Closure
We would also like to take this opportunity to wish you a very Merry Christmas & Happy New Year and thank-you for your continued support throughout the year.
Our office will be closing at 11am on Friday 22nd December 2017 and will re-open 8.30am on Monday 8th January 2018.
We look forward to catching up with you in the New Year.
DISCLAIMER: The information on this website and the links provided are for general information only and should not be taken as constituting professional advice from Hall Browns Accountants. You should consider seeking the appropriate legal, financial, or taxation advice to check how the website information relates to your unique circumstances.