09 Dec Christmas Gifts To Employees
With Christmas festivities upon us there will be many businesses looking forward to celebrating all their hard work with their employees at a end of year work party or by thanking them with a Christmas gift.
If you’re planning on holding a Christmas party off-premises for your staff, this is regarded as an ‘entertainment’ expense. Entertainment is not tax deductible unless it is associated with paying Fringe Benefits Tax (FBT). In most circumstances paying Fringe Benefits Tax on your entertainment expenses is not tax effective and so the general outcome is that Christmas festivities are unfortunately not tax deductible.
If you plan to run a function for customers, there are no FBT implications for these individuals, but the costs are not tax deductible either.
Employee & Client Gifts
Gifts below $300 are a tax deductible expense providing they are classified as a ‘non-entertainment’ gift. The same rule applies for other special occasions such as birthdays.
If these gifts are ‘infrequent’, you can claim a tax deduction for gifts valued at less than $300 for employees and there is no FBT.
If your gift giving extends to your customers, the gifts should be tax deductible however the gift should not be in the form of entertainment.
One of the most important things to note when planning a deductible gift is to ensure the gift meets the ‘non-entertainment’ classification. Gifts such as gift vouchers, a bottle of alcohol, hampers, groceries, games, flowers and beauty products all fit the ‘non entertainment’ classification.
Gifts that are considered ‘entertainment’ and therefore not deductible include theatre, concerts, movie or sporting event tickets, holidays including accommodation and tickets to amusement parks.
The GST input tax credits for the cost of the party or gift can only be claimed in the next Business Activity Statement if the cost of the party or gift is tax deductible.