Gifting at Christmas Time

Gifts to staff:

Given the challenges that many have faced during this last year, you may be looking to reward your staff this Christmas time.  Whilst Christmas gifts are a lovely way to show your appreciation, please remember that they may be liable for fringe benefit tax (FBT) or PAYE. 

Generally speaking, vouchers (not redeemable for cash) are liable for FBT unless the value falls under the De-minimis exemption.  Vouchers that can be redeemed for cash or any cash bonus fall under the PAYE rules (payroll).

The FBT De-minimis exemption allows employers to provide unclassified benefits (gifts) to employees without being liable for FBT.  To qualify under this exemption, the total taxable benefit to a single employee must not be more than:

• $300 per quarter (for employers who pay quarterly FBT)
• $1,200 per annum (for employers who pay annual FBT)

Also, total unclassified fringe benefits provided to all employees must not exceed $22,500 per annum.

If the total benefits provided exceeds these thresholds, then the full value of all the benefits (including the first $22,500) will be subject to FBT.

A gift of food e.g., a Christmas ham, bottle of wine or chocolates are subject to the entertainment regime and are only 50% deductible.

Gifts to clients:

Please remember that if you are giving gifts to your clients at Christmas time (or any other time during the year) that some gifts will be fully tax deductible, i.e.: calendars or tickets to an event, and some may only be 50% tax deductible, i.e.: food hamper or bottle of wine.  Generally speaking, gifts of food and drink (entertainment) will only be 50% tax deductible.

Staff Christmas party:

Whether hosted on your own premises or offsite, staff Christmas parties are classed as entertainment and subject to the entertainment regime being only 50% deductible.  Associated costs such as catering, venue and music hire etc, are also limited to 50%.

Client Christmas drinks:

Client related entertainment is also subject to the entertainment regime.  However, if your event is open to the public then the costs may be 100% deductible.   If your event is restricted to clients only then the costs associated with this will only be 50% deductible.

If you would like more information about your FBT obligations or if you have questions around what expenses are tax deductible, please give our team a call on 06 876 8124.