The festive season is the perfect time to show appreciation to your clients and employees. While giving gifts can strengthen relationships and boost morale, it’s also important to consider the tax implications for your business. The good news is that some gifts are tax-deductible, helping you spread holiday cheer while minimising the financial impact.
In this blog, we’ll explore the types of gifts that are generally deductible and how you can give back this holiday season without facing unnecessary tax hurdles.
1. Client Gifts
When selecting gifts for clients, you want to ensure that they’re meaningful and beneficial to your business. Fortunately, some client gifts may be considered tax-deductible as a business expense, provided they meet ATO guidelines.
Hampers and Gift Baskets
Hampers filled with gourmet food, beverages, or chocolates are a great way to say thank you. If the gift is reasonably priced and given for business purposes, it’s typically deductible as long as it’s not considered entertainment.
Branded Merchandise
Practical items such as branded stationery, notebooks, or reusable water bottles can be appreciated by clients and help keep your brand front of mind. As these gifts are considered business-related, they usually qualify as tax-deductible.
Gift Cards
Gift cards are a versatile and thoughtful present for clients. These are often deductible as long as they don’t fall under the “entertainment” category, meaning they can’t be for things like dining or holiday packages.
2. Employee Gifts
Recognising your employees’ hard work during the year with gifts can also be tax-smart. However, you need to be mindful of Fringe Benefits Tax (FBT) rules.
Non-Entertainment Gifts Gifts such as hampers, wine, or flowers given to employees as part of a Christmas celebration are typically tax-deductible and exempt from FBT, provided they’re below the ATO’s $300 minor benefits exemption. Keep in mind that this exemption applies on a per-person basis.
Related: Festive Celebrations at Work: Christmas Parties and Gifts with FBT in Mind
Gift Vouchers
Gift vouchers that are non-entertainment-related (e.g., shopping vouchers) and under $300 can also be exempt from FBT and deductible. It’s a great way to offer flexibility to employees without incurring additional taxes.
Physical Goods
Items like gadgets, tech accessories, or office supplies also fall under tax-deductible, non-entertainment gifts. As long as the total cost remains under the $300 exemption, these gifts can avoid FBT.
3. What About Christmas Parties?
While Christmas parties are a great way to celebrate the festive season, they are usually subject to FBT. However, if you host the event on business premises and keep costs per person below the minor benefits threshold, you can potentially reduce your FBT liability.
Related: Festive Season is Just Around the Corner! Tax Friendly Gifts & FBT-Friendly Christmas Parties
4. Avoiding Non-Deductible Gifts
It’s important to note that some gifts, especially those that fall under the category of entertainment, are not tax-deductible. This includes:
- Tickets to concerts or sporting events
- Holiday packages
- Restaurant meals
These items may also attract FBT, so it’s wise to plan accordingly and consult your accountant to ensure your gift-giving efforts remain tax-efficient.
Thoughtful gift-giving doesn’t have to break the bank — especially when you can take advantage of tax-deductible options. Whether you’re thanking clients for their loyalty or recognising your employees’ hard work, there are many ways to spread holiday cheer while keeping tax considerations in check.
Remember to consult with your tax advisor to ensure your Christmas gifts are compliant with the latest ATO rules and to maximise the tax benefits for your business.
Need Help With Tax Planning?
If you have any questions about tax-deductible gifts or would like assistance with tax planning for the holiday season, contact our team. We’re here to help you make the most of your tax strategy this Christmas and beyond.
Have you noticed our #FridayExpertTips... here's one that relates to #Taxation
"Do you know the Tax Deductions and offsets for which you might be eligible this Financial Year? They change every year so check with your Tax Advisor!"
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