All the Christmas gifts fall under 4 categories.

  1. Entertainment gifts which cost more than $300
  2. Entertainment gifts which cost less than $300
  3. Non-Entertainment gifts which cost more than $300
  4. Non-Entertainment gifts which cost less than $300

Now let’s look at each of those 4 categories in terms of your tax obligations.

Entertainment gifts which cost more than $300

Entertainment gifts are more recreational gifts such as tickets to a concert or a musical, a movie theatre, live play, sporting events or gifting a holiday package.

For those entertainment gifts which cost more than $300 per employee, GST can be claimed and also it’s tax-deductible. The downside is that Fringe Benefit Tax (FBT) is payable at the rate of 49 percent on the grossed-up value.

Entertainment gifts which cost less than $300

For the entertainment gifts that cost less than $300 per employee, FBT is not payable, but also you can’t claim GST credits and not tax-deductible.

Non-Entertainment gifts which cost more than $300

Non-Entertainment gifts are items such as beauty and skincare products, flowers, wine, perfumes, gift vouchers, and hampers.

When the cost of those gifts are more than $300 per employee, you are liable to pay FBT, but it is tax-deductible and you can claim GST credits.

Non-Entertainment gifts which cost less than $300

When the cost of those non-entertainment gifts are less than $300 per employee, you are not liable to pay FBT, and also it is tax-deductible and you can claim GST credits.

Please have a look at the below matrix made by us to get a further understanding.

What’s the best gift to give an employee this Christmas?

Based on the above criteria, a Non-Entertainment gift that costs less than $300 per employee is the best choice of gift this Xmas. It will be tax-deductible, GST credits can be claimed and also you will not be liable to pay FBT.

Sources – https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/FBT-and-Christmas-parties/

For more information give our team at SPS Business Consultants a call on ☎️ (03) 9904 9261.