Christmas gifts

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 gifts is 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.

We understand that this can all be somewhat bewildering, so if you would like a little help, just contact our office.

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