Christmas goodwill

Gift giving

In November 2010, Clive Palmer reportedly gave 750 long term employees of the Yabulu Refinery luxury overseas holidays for two for Christmas.  Fifty of his most valued employees received a new Mercedes Benz. Nice.

For the rest of us, we tend to work on a return on investment principle. You want the gift to have an impact for the investment made and if you can do this in a tax efficient way then all the better.  Mr Palmer certainly got the impact part right.  When it comes to tax efficiency however, it’s likely that he received a very large Fringe Benefits Tax New Year hangover.

So, how do you avoid incurring more tax than you need to at Christmas?

If the gifts are for employees, you need to keep the cost of the gift below $300 per person – sorry, no Mercedes this year team.  The gifts also need to be ad-hoc so splitting a $2,000 gift voucher into 10 x $200 vouchers and giving them to an employee at the end of each month won’t fool the ATO.  If the gift is ad-hoc and below $300, the Tax Office considers it to be a minor benefit and as such, exempt from FBT.  Gifts above this level are deductible to the business but FBT will apply.

If the gift is for a client, gifts are deductible as long as the gift is given by the business with the expectation that the business will benefit (i.e., the gift is given with the expectation of generating revenue).

Spreading the joy – entertaining clients

Entertaining your clients at Christmas is not tax deductible.  So, if you take them out to a nice restaurant, to a show, or any other form of entertainment, then you can’t claim it as a deductible business expense and you can’t claim the GST credits either.  It’s goodwill to all men but not much more.

To learn how goodwill and/or gifting may impact your circumstances call PPT on (03) 5331 3711.

DISCLAIMER: The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.