Christmas giving - what you should know

When it comes to Christmas giving, creating goodwill with your staff, suppliers and your customers can be tax deductible if you do it within the rules. For the business manager or owner, the aim is to spread that goodwill without incurring an unexpected tax bill at the same time. The rules are complex so please check with your advisors about specific cases but here are some guidelines.

Giving to Clients/Customers/Contractors

Fringe Benefits Tax (FBT) only applies to employees and their associates (spouse,partner), so it isn’t a consideration when it comes to giving to your clients, customers or contractors. However, if you would like to receive a tax deduction and GST credit for the expense incurred, then it is important to understand whether the gift is classified as entertainment or non-entertainment.

There are different rules for gifts which are considered “entertainment” and those which are not. Entertainment includes things such as tickets to sporting events or shows, restaurant meals, holidays, airline tickets, etc.

Non-entertainment gifts can still be fun and includes things such as hampers, gift vouchers, alcohol and flowers for example.

Entertainment gifts are non-tax deductible and you cannot claim a GST credit for them, where-as non-entertainment gifts are both tax deductible and you can also claim a GST credit. Therefore if the tax deduction and the GST credit is important, you should stick to non-entertainment gifts for your clients, customers and Contractors.
 

Giving to Staff

When it comes to gift giving to staff, it is important to understand that Fringe Benefits Tax (FBT) can apply, however there is an exemption available if the benefit is considered minor and this is often referred to as the under $300 rule.

Where gifts are provided to staff at Christmas that are under $300 then no FBT will apply.
When it comes to claiming a tax deduction and GST credit, then it is important to refer back to whether the gift is one of entertainment or non-entertainment.

Non-entertainment gifts for staff will be tax deductible and you can claim the GST. On the other hand entertainment gifts are not tax deductible and no GST credit can be claimed. Therefore if the tax deduction is important, you should stick to non-entertainment gifts for your staff. 

This information is provided by Australian Bookkeepers Network Pty Ltd www.austbook.net