It depends… Tax laws regarding gifts to employees and clients can be complex.

A gift and the Christmas party are viewed as separate benefits for the $300 minor benefits limit, which means employees can have twice the fun without FBT applying.

Non-entertainment gifts provided to employees are usually exempt from FBT where the total value is less than $300 inclusive of GST.  These include wine, flowers and hampers for example.  The business can also claim a tax deduction and any applicable GST credits.

Providing entertainment as a gift or Christmas party has different tax implications.  If the cost for each employee is less than $300 GST inclusive, FBT is not payable, but no tax deduction or GST credit can be claimed.  Examples of entertainment gifts include tickets to the theatre, a movie, sporting event, or gift cards.

If you provide an employee with a non-entertainment gift that is more than $300 GST inclusive, FBT may be payable at the rate of 49% on the grossed-up value however a tax deduction and GST credit can still be claimed.

Non-entertainment gifts given to clients and suppliers do not fall within the FBT rules.  Generally, a tax deduction and GST credit can be claimed for gifts to clients, provided they are not excessive.

The best tax outcome for your business this Christmas is keeping to the $300 rule and to give staff, customers and suppliers non-entertainment type gifts.