Christmas & Tax
It’s not normally two words you would put in the same sentence. However, there are tax issues that crop up at this time of year that it is helpful to know about.
1. Gifts to employees
Fringe benefits tax is the main issue surrounding gift giving to employees. There are a few steps to follow to ensure that you are adhering to the tax rules in regards to gifts.
First, is the gift classed as entertainment? If so, does it cost less than $300 (including GST)? If the entertainment gift is less than $300 then it attracts no Fringe Benefits Tax (FBT), GST cannot be claimed and it is not deductible for tax purposes.
If the entertainment gift is over $300, it will attract FBT but is also deductible for tax purposes and GST can be claimed.
If the gift is not entertainment (eg. cash, hampers, etc.) you must still apply the $300 rule. If it is less than $300 then it does not attract FBT but GST can be claimed and it is deductible for tax purposes. If it is over $300 it attracts FBT, GST can be claimed and it is deductible for tax purposes.
2. Gifts to clients/customers
The $300 rule does not apply to gifts to clients. The only distinction that needs to be made is if the gift is entertainment or not. If the gift is entertainment then it does not attract FBT, GST cannot be claimed and it is not deductible for tax purposes.
If it is not classed as entertainment, it does not attract FBT but GST can be claimed and it can be expensed for tax purposes.
To ensure you receive the maximum benefit when gift-giving this Christmas, keep the cost under $300 per head and provide gifts that are not entertainment based. This ensures there is no FBT but the expense is still claimable for tax and GST purposes.