Some employers, especially at Christmas time or for birthdays, give small gifts to their employees or the employee’s associates (i.e. spouses). These gifts typically take the form of bottles of wine, movie tickets, gift vouchers etc.
The tax treatment of these gifts from an employer standpoint, depends upon a range of factors including:
Use the following steps as a guide:
1. Does the gift constitute entertainment?
(gifts that constitute entertainment include: tickets to the movies/plays/theatre, restaurant meals, holiday airline tickets, admission
tickets to amusement parks etc.)
(gifts that do not constitute entertainment include: Christmas hampers, bottles of alcohol, gift vouchers, perfume, flowers, pen sets)
2. Does it cost less than $300 (GST-inclusive) and is provided infrequently?
3. Does it cost less than $300 (GST-inclusive) and is provided infrequently?
All told, from a tax standpoint it’s best to buy employees and their associates non-entertainment gifts that cost less than $300. That way, no FBT is payable yet a deduction and GST credits can be claimed. Alternatively, you can put the tax burden back on the employee and pay them a cash bonus, in which case the amount will be assessable to the employee, and deductible to the employer.
Speak to your Forsyths Adviser today to find out more.
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.