Christmas gifts & FBT
Editor: With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers. Again, we thought we would now discuss how gifts to staff and clients, etc., are handled "taxwise".
Gifts which are not considered to be entertainment
These generally include, for example, a Christmas hamper, a bottle of whisky or wine, gift vouchers, a bottle of perfume, flowers, a pen set, etc.
Briefly, the general FBT and income tax consequences for these gifts are as follows:
- gifts to employees and family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible; and
- gifts to clients, suppliers, etc. – no FBT, and tax deductible.
Gifts which are considered to be entertainment
These generally include, for example, tickets to attend a theatre, live play, sporting event, movie or the like, a holiday airline ticket, or an admission ticket to an amusement centre.
Briefly, the general FBT and income tax consequences for these gifts are as follows:
- gifts to employees and family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible; and
- gifts to clients, suppliers, etc. – no FBT and not tax deductible.
Non-entertainment gifts at functions
Editor: What if a Christmas party is held at a restaurant at a cost of less than $300 for each person attending, and employees with spouses are given a gift or a gift voucher (for their spouse) to the value of $150?
Under the actual method, for employees attending with their spouses – no FBT is payable because the cost of each separate benefit (including the gift) is less than $300 (i.e., the benefits are not aggregated).
No deduction is allowed for the food and drink, but the gift is tax deductible.
Where the 50/50 method is adopted:
- 50% of the total cost of food and drink is liable to FBT and tax deductible; and
- the total cost of all giftsis not liable to FBT because the individual cost of each gift is less than $300.
As the gifts are not entertainment, the cost is tax deductible.
Editor: We understand that this can all be somewhat bewildering, so if you would like a little help, just contact our office.