Gifts to employees and clients are a common practice for businesses. However, it’s important to understand the taxation implications of such gifts.

According to the ATO, gifts provided to employees are considered a form of remuneration and are subject to fringe benefits tax (FBT) if the value of the gift is more than $300. If the gift is under $300, it is generally exempt from FBT. Gifts that are considered ‘minor and infrequent’ are also exempt from FBT, provided they are not given as a reward for services performed by the employee.

Gifts provided to clients, on the other hand, are advertising or promotional expenses and are generally tax deductible.

It’s important to keep proper records of gifts provided to staff and customers, including the date, recipient, nature of the gift, and the cost. Failure to maintain proper records may result in penalties or fines.

In conclusion, while providing gifts to staff and customers is a common practice, it’s important to understand the taxation implications and comply with the guidelines set by the ATO. By doing so, businesses can avoid penalties and fines and maintain good relationships with their staff and customers. If you require more assistance on this matter, please contact our office at 03 9973 5905.