At this time of year, clients often ask Chan & Naylor about tax deductible gifts for clients, staff and business associates. Find out what gifts are tax deductible by watching our short video below.
Hello. My name is Janelle Bartlett. I’m a chartered accountant and partner at Chan & Naylor Redlands. At this time of year, clients often ask us about tax deductible gifts for clients, staff and business associates. So what gifts are tax deductible? The answer is complicated because they are quite a few factors that come into play particularly the issue of Fringe Benefits Tax. We’d really want to avoid that. So I’m actually going to go into provide a really simple answer for you.
So corporate gifts are complicated. Some of them are tax deductible but some are subject also to fringe benefits tax and that makes them very very costly. We’re providing a really simple answer with 2 lists.
Gifts for staff, client, suppliers and business associates. The first list is the good list, and that’s gifts that are tax deductible with no extra fringe benefits tax. And the second list is the bad list. It’s not tax deductible or fringe benefits tax does apply. And that’s very expensive.
Tips about good list. Remember that they must cost less than $300. So not $300 it has to be less. If the gift costs $300 or more, you don’t need the requirements and you don’t have the benefits of being tax deductible.
They need to be given infrequently, so you can’t give them every week or all of the time, perhaps twice per year is a good rule of thumb. And Christmas is obviously one of those times.
There must not be entertainment. We’ll talk a little bit about entertainment gifts. But the gifts I will give you in the good list will all be qualified and not considered entertainment.
So what are good gifts. Gift Baskets are great. Flowers are acceptable. Department store gift card like Coles Myer card and similar are great as well. Alcohol but it must not be consumed, it has to be sealed and given as a sealed gift. Or massage voucher something like pure indulgence on one of the massage places. So all of those gifts if they are under $300, they are going to be fine, tax deductible, and you can claim the GST if you are registered.
So next we’ll talk about bad gifts. These are the gift that are quite costly because they are either not tax deductible or they are subject to fringe benefits tax which is a very expensive tax. So ticket and gift cards to:
Meals and restaurants
Golf &sporting events
Theater & concerts
Accommodation (that is not work)
Travel & flights (that is not work)
So this are all things you have to avoid because a lot of them are subject to fringe benefits tax and some of them are not deductible. So the ones that are noted here with hash entertainment. That’s why they are on the list so, a movie voucher is not acceptable because it’s subject to fringe benefits tax but a Coles Myer voucher is okay. It’s on the good list.
Once a client ask me about the gifts to family. The most important thing to remember here is that you must deal with your family at arm’s length. So think to yourself if the task or role had been provided by someone was not in your family, would you give them a gift? So just have a think about that and that will always keep that arm’s length idea in front of your mind. So be careful because if the gift is private, it’s not deductible.
So I’m going back to the good gifts. These are the things we do want to give to people because we do achieve a tax deduction if they are under 300$ and we can claim the GST if we are registered. So this things are gift baskets, flowers, department store gift cards for example Coles Myer, David Jones, BWS, Rebel and all of those retail cards that are available. Alcohol but it must be sealed. A massage voucher or pure indulgence.
This is my disclaimer. The information presented here is general in nature, I have made various assumptions which might not reflect your particular circumstance. You should always seek personal advice to be sure that the information is right for you.
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