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Published by Steven Rider at December 21, 2023

Can I make a Christmas gift to employees or clients and claim the GST or a tax deduction?

Can an employer give gifts to an employee?
Are gifts to employees tax deductible?
Are gifts to clients tax deductible?
What is the minor benefit rule

As the song goes, “it’s the most wonderful time of the year” and you may want to show your appreciation by giving employees or clients gifts during the festive season. However, here are some FBT (Fringe Benefit Tax) and tax rules you need to follow.

Can an employer give gifts to an employee?

Yes, definitely, you can give gifts to an employee but what you give and how much you give has tax implications.

What you give: Is it entertainment or non-entertainment?

How much you give: Is the value of the gift under or over $300 (incl GST)?

Are gifts to employees tax deductible

Non-entertainment gifts

Non-entertainment gifts can include products, flowers, wine, perfumes, gift vouchers and hampers.
Gifts to employees and family members attract FBT and are tax deductible. If their value is less than $300 including GST and they are considered infrequent and irregular, they fall under the minor benefit exemption (read more about this below) which means they don’t attract FBT but are still tax deductible.

Entertainment gifts

Gifts that are considered to be entertainment may include sporting tickets, movie tickets, overseas plane tickets, tickets to attend the theatre.
Entertainment gifts over $300 (incl GST) to employees and family members attract FBT and are tax deductible. If their value is less than $300 including GST and they are considered infrequent and irregular, they fall under the minor benefit exemption (read more about this below) which means they don’t attract FBT and are NOT tax deductible.

The best gifts to give to employees and associates are non-entertainment gifts under $300 (incl GST) as they will not attract FBT but will still be tax deductible.

Are gifts to clients tax deductible?

Giving non-entertainment gifts to clients at the end of the year is always popular and may help you retain clients and generate more income for your business. Non-entertainment gifts to clients of any value do not attract FBT but they will generally be tax deductible as long as they are not excessive.

Entertainment gifts to clients will not attract FBT and will NOT be tax deductible.

What is the minor benefit rule?

A minor benefit is one that is provided to an employee or their associate
Is given on an “infrequent” or “irregular” basis
Not a reward for services
Costs less than $300 (inclusive of GST) “per benefit”. Entertainment expenses are not tax-deductible unless they are subject to FBT.

If deemed to be a minor benefit, then no FBT is payable.

Steven Rider

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