In The Spirit Of Giving These Holidays? Here’s What You Need To Know About Tax On Gifts Made To Your Employees

Posted on 20 December '21 by , under tax.

Are you considering giving your employees a treat this year as a thank you for their hard work?

Certain gifts that are given to your employees may be claimable as a tax deduction under strict conditions and rules. During this time of giving, a Christmas gift can be rewarding to both the employee and the employer.

Any sort of gift that may be classified as entertainment cannot be claimed on your tax, regardless of the time of year. If you wish to claim your gifts as a tax deduction (which is generally a good idea), it’s best to give items that are classified as non-entertainment gifts. These types of gifts that are given to staff or associates are usually exempt from fringe benefits tax (FBT), with the item cost, as well as the GST, being claimable.

There are certain gifts that fall within the ATO’s guidelines on what is a tax-deductible gift. If you’re looking for ideas on what to give your staff this Christmas, consider:

  • Hampers
  • Skincare
  • Beauty products
  • Flowers
  • Wine
  • TV
  • Computers
  • Crockery
  • Gardening Equipment
  • Gift Vouchers
  • Groceries
  • Games

However, these gifts should not be more than $300 in order to claim the GST credit and not incur FBT. If the gift costs more than $300, you will still be able to claim a tax deduction and the GST credit. However, FBT will be payable at the rate of 49% on the grossed-up value of the gift.

If you’re feeling more generous and really want to thank your staff, bear in mind that any gifts that you give to your staff that could be considered as a personal gifts may not be claimed as a tax deduction. Those items that cannot be claimed under the minor benefits rule generally fall under the entertainment or recreational classification, and could include:

  • Tickets to the theatre or sporting events
  • Movie tickets
  • Holidays
  • Accommodation
  • Flights
  • Club memberships
  • A trip to the amusement park
  • Live Events

Keep records of all of the expenses associated with purchasing gifts this holiday season for your staff so that we can assist with your business’s tax return.

As a rule of thumb:

  • Make sure your gift is less than $300 (including GST)
  • Make sure the gift is classified as non-entertainment
  • Make sure your gift is a once-off
  • Make sure your gift does not incur FBT
  • Keep your records to prove that the gift was bought for and given so that you can claim your tax deductions.