December 9, 2022 UFinancial

Company Christmas gifts and unwanted tax

Christmas is traditionally a time of giving, including employers showing gratitude to their workers for a job well done throughout the year. However, depending on the nature and value of the gift, and also to whom it is gifted, such magnanimity can attract unwanted tax consequences. So how do you as an employer gift most tax-effectively this festive season?

 

Gifts to employees and their associates (e.g. spouses)

The first step is determining whether the gift constitutes entertainment. Gifts that constitute entertainment include tickets to movies, plays, sporting events, theatre, restaurant meals, holiday airline tickets, and admission tickets to an amusement park. On the other hand, the following gifts are not entertainment: Christmas hampers, bottles of alcohol, gift vouchers, perfume, flowers, and pen sets.

Where an entertainment gift costs less than $300 (GST-inclusive) and is provided infrequently throughout the year, there will generally be no Fringe Benefits Tax (FBT), no deduction will be allowed, and no GST credits can be claimed.

Where the cost is $300 or more, FBT will apply, and a deduction and GST credits can be claimed.

Where a non-entertainment gift is in play, and it costs under $300, no FBT will apply, but a deduction and GST credits can be claimed. Where the cost is $300 or more, FBT will apply, and a deduction and GST credits can be claimed.

All told, therefore, the best result for an employer (at least from a tax standpoint) is to provide a non-entertainment gift under $300.

 

Gifts provided to third parties (e.g. clients, suppliers, contractors etc.)

Where gifts are provided to these recipients, the $300 threshold has no relevance.

Gifts that constitute entertainment (irrespective of cost) do not attract FBT, cannot be deducted, and no GST can be claimed.

By contrast, non-entertainment gifts do not attract FBT, however, a deduction and GST credits can be claimed – again, irrespective of the cost.

 

Cash bonuses

Alternatively, instead of gifts, employers may wish to provide cash bonuses to their staff. From a tax perspective, the attraction of doing so is that it shifts the tax burden away from the employer and onto the employee. That is, the cash counts as assessable income for the employee while the employer can claim a deduction. No FBT is payable by the employer on a cash bonus.

 

Leave bonus

Another benefit that may be considered by employers is a leave bonus. For example, allowing workers to finish up for the year a couple of working days before Christmas and not have that count against their annual leave balance, noting that this may be a quiet time of the year for business anyway. There are no adverse tax consequences for either party. The added benefit for the employer is that, unlike a cash bonus, there is no immediate cash flow impact.

 

Need assistance with the tax treatment of your Christmas giving?

Our in-house accountants offer proactive solutions for all your business accounting and taxation needs. Book a free chat today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.

author avatar
UFinancial
Google Rating
5.0
Based on 270 reviews
js_loader

Free Investment Property Analysis

  • This field is for validation purposes and should be left unchanged.

Free Property Report

  • This field is for validation purposes and should be left unchanged.

Talk to us today

  • (e.g. 0422999222 or 0396869087)
  • This field is for validation purposes and should be left unchanged.

Download our free Property & Investment tips

Enter your details below to download

  • This field is for validation purposes and should be left unchanged.

Download our free Construction Guide

Enter your details below to download

  • This field is for validation purposes and should be left unchanged.

Download our free Refinancing tips

Enter your details below to download

  • This field is for validation purposes and should be left unchanged.

Download your property investor tax checklist

Enter your details below to download

  • This field is for validation purposes and should be left unchanged.

Download your free budget template

Enter your details below to download

  • This field is for validation purposes and should be left unchanged.

Download your tax checklist

Enter your details below to download

  • This field is for validation purposes and should be left unchanged.

Download our free Home Loan tips

Enter your details below to download

  • This field is for validation purposes and should be left unchanged.

Download our free Money Management tips

Enter your details below to download

  • This field is for validation purposes and should be left unchanged.

Refer a Friend

  • (e.g. 04222999222 or 0396869087)
  • This field is for validation purposes and should be left unchanged.

Let's talk about commercial and asset finance

"*" indicates required fields

(e.g. 0422999222 or 0396869087)
This field is for validation purposes and should be left unchanged.

Accounting & Tax

What are you interested in?

  • This field is for validation purposes and should be left unchanged.

Subscribe to our newsletter

Financial news, blog posts, special events, giveaways and promotions. – please register below.

Let's chat about your car loan options

Car loans

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Let's chat finance

Financial planning

  • This field is for validation purposes and should be left unchanged.

Let's chat about a new loan

Upgraders

  • This field is for validation purposes and should be left unchanged.

Let's chat about property investment

Property Investors

  • This field is for validation purposes and should be left unchanged.

Let's chat about your refinancing options

Refinancers

  • This field is for validation purposes and should be left unchanged.

Let's chat about a loan for your first home

First Home Buyers

  • This field is for validation purposes and should be left unchanged.