Christmas Gifts – The New Rules - May 2009

With Christmas almost upon us, many employers will be shopping for Christmas gifts for their employees, clients and other special people.

At this point it is important to consider the new rules relating to the minor fringe benefit exemption which can save employers $000’s. These rules now allow an employer to provide an “infrequent” benefit to an employee – up to $300 – without having to pay any Fringe Benefits Tax. These benefits are termed minor exempt fringe benefits.

The new rules get even better by applying each benefit separately, for example where a gift is provided to both an employer and their spouse, the gifts are applied separately for the $300 threshold. In other words under the new approach the ATO accepts that different benefits are not added together when applying the <$300 threshold.

Gifts Which Are Not Considered To Be Entertainment

These generally include, for example:

  • A Christmas hamper
  • A bottle of whiskey
  • Wine
  • Gift voucher
  • Bottle of perfume

Briefly the general FBT, tax, and GST consequences of these gifts are as follows:

  • Gifts to employees and family members – FBT is payable (except minor benefits as discussed above) and a deduction is allowed
  • Gifts to clients, suppliers etc – No FBT and a deduction is allowed
  • From a GST point of view an input tax credit is available under both situations described above.

Gifts Which Are Considered To Be Entertainment

These generally include for example:

  • Theatre tickets
  • Sporting event
  • Movie
  • Holiday airline ticket
  • Ticket to an amusement centre

Briefly the general FBT, tax, and GST consequences of these gifts are as follows:

  • Gifts to employees and family members – FBT is payable (except minor benefits as discussed above) and a deduction is allowed
  • If the minor benefit exemption applies to entertainment (<$300) then no FBT is payable but also no deduction can be claimed.
  • Gifts to clients, suppliers etc – No FBT and no deduction is allowed
  • From a GST point of view an input tax credit is not available for the non-deductible portion of entertainment expenses.

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