As the festive season approaches many businesses are considering what gifts they will give staff and clients.
As a result many business owners are also left wondering about the tax implications of gift giving – in particular the FBT and income tax consequences.
The first step in answering this question is to determine whether a gift is (or is not) “entertainment”.
Gifts which are considered “entertainment” include; tickets to the theatre, sporting events, concerts, movie tickets, airline tickets, etc.
In these cases – gifts that cost $300 or more, are entertainment and provided to employees will be subject to FBT and will also be tax deductible – gifts costing less than $300 are not subject to FBT – but they are also NOT tax deductible.
Entertainment gifts provided to clients &/or suppliers are not subject to FBT and are also not tax deductible (regardless of the value).
Gifts not considered “entertainment” – are things such as: flowers, perfume, Christmas hampers, wine, spirits, gift vouchers, pen sets, etc.
Gifts such as these provided to an employee (and family members) will be tax deductible (regardless of value). FBT will only apply in cases where the value of the gift cost more than $300 – so keeping the value under this amount avoids any FBT.
Gifts to clients, suppliers, business associates, etc. will also be tax deductible and no FBT will apply – in this case the $300 threshold is irrelevant.