As they say, Christmas is the time for giving but as a business owner, can you claim any of those gifts as a tax deduction? Here’s an overview to help you but for accurate advice before you buy, get in touch with us.
Which gifts are NOT tax deductible?
- Gifts for your family and friends. Tax deductible gifts must be business related.
- Tickets to entertainment events, e.g. theatre, movies, concerts, theme parks, sporting events, holidays or components of holidays such as accommodation or flights.
- Gifts over $300 in value (GST incl.) given to staff, clients, suppliers etc. will incur Fringe Benefits Tax. However, you may be able to receive GST credits on the purchase.
- Alcohol, if it is consumed during the staff Christmas party, is NOT a tax deductible gift although you can still claim GST credits.
Which gifts are generally tax deductible?
- Gifts given to employees, contractors, associates, suppliers and clients providing they are under $300 (GST incl.) in value.
- Charitable donations over $2 and NOT given in exchange for goods or services like raffle tickets, novelty items or tickets to charity dinners.
- Non-entertainment gifts which covers most items you can purchase from department stores or other retailers. They include:
- Gift vouchers
- Alcohol providing it is not consumed at your business Christmas party
- Electronic goods
What about cash bonus payments to staff?
If you hate the idea of shopping but want to show your staff that you appreciate their efforts, cash bonuses are classified as a business expense. But you need to be careful.
- The ATO considers cash bonuses as part of an employee’s income so any bonuses paid will be treated like their salary
- That means you need to consider PAYG holding, super guarantee and payroll tax when paying cash bonuses
- There are no GST credits or FBT (Fringe Benefits Tax) payable on cash bonuses
An extra tip on Christmas gifting
If you are giving your Christmas gifts to staff during the workplace Christmas party, the gift will NOT be included as part of the party costs. For more information on Christmas party tax deductions, read our blog here.
For common sense, practical taxation advice, you can trust W M Wright & Co. For more information or advice, contact the team on 02 4721 744 or email Wayne at firstname.lastname@example.org