Can Gifts such as a Christmas or Appreciation Gift be claimed as Tax Deductible?

At this time of year, it is normal to give presents to existing clients and customers as a gesture of goodwill and also as a thank you for their patronage and support of your business.

The gift is often considered a tax deduction since it involves a cost to your business.

The ATO considers gifting expense to be incurred in the course of doing a business for the purpose of generating or producing assessable revenue.

In this case, it is expected that the gift expenditure is in the nature of a company promotion since there is an expectation that the gift will create a future business from the customer or drive them to recommend your services to others.

It should be observed that if a gift qualifies as an entertainment, it will be become a non-taxable deduction.

These are the typical examples of gifts that are NOT intended to be entertaining

In summary, these gifts have no Fringe Benefits Tax and are tax deductible.

These are the typical examples of gifts that are thought to be entertaining

These are likewise exempt from GST but are not tax deductible.

What is the implication of gifting or having a Christmas party for the employees?

A Christmas party or gift to an employee or associate can be considered a minor benefit exemption. This means that if they are not regularly provided with similar benefits and the cost is less than $300 inclusive of GST per employee/associate, it is exempted from FBT but is considered as non-deductible.

Gifts over $300 inclusive of GST per employee/associate are tax deductible, but FBT is at 47%.

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