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  • Writer's pictureAmanda Amey

Are Gifts a Tax Deduction?

Updated: May 19, 2023

Can I claim Christmas Gifts
Are Gifts a Tax Deduction?

Parties and Gifts are not treated the same way for tax deductibility purposes so watch what you spend your money on and how much.

Generally it is considered that the best tax outcome is for businesses to give non-entertainment gifts, at a cost of less than $300 (inclusive of GST) per employee.

Christmas Parties held off-premises for your staff are classified as an 'entertainment' expense. (Like right! Who even wants to party with the boss)

Entertainment is not a tax deductible expense (contrary to what some of your mates may think) unless it is associated with paying Fringe Benefits Tax (FBT)

Fringe Benefits Tax (FBT) is an additional tax payable by the employer that is calculated on the taxable value (by set mark-ups) of the fringe benefit to 'cover' for the fact that there is a tax deduction for an otherwise personal expense.

The ATO provides an exemption from FBT if the celebrations are infrequent and the cost per employee of the party is less than $300. BUT, If there is an exemption from FBT, then it is also no longer deductible. (What?!?!)

If you spend more than $300 per employee, be careful to ensure that you are also paying Fringe Benefits tax for the benefit, and thus, the expense becomes tax deductible. (and GST credits can be claimed)

What if the function is for clients and referring partners?

If it is a function and held off-premises it will still be classified 'entertainment' and as entertainment is non tax deductible, these little parties, footy and golf days are, in-fact, not tax deductible.

Are Gifts different to entertainment?

Gifts are a little different to parties. Gifts that are below $300 are a tax deductible expense providing they are not classified entertainment. (Even if you don't pay FBT on them) As long as these gifts are infrequent you can claim a tax deduction for them.

Note, that a gift for ballet tickets, or footy tickets are actually classed as entertainment rather than a gift, so think carefully about what type of gifts you hand out, especially at Christmas time.

TIP: Gifts must be classified a non-entertainment to meet the tax deductibility rule. non-entertainment gifts can include gift vouches, hampers, flowers and alcohol but cannot include things like theatre, concerts, movies or sporting event tickets.

Remember though, FBT must also apply to all gifts of more than $300.

This articles intention is to inform rather than advise and is based on legislation at the time. Each Taxpayer’s circumstances vary so we strongly recommend that you discuss this information with your Tax Agent, Accountant or Bas Agent before implementation. If you take, or do not take action as a result of reading this article, we accept no responsibility for any financial loss incurred. This is general advice only.


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