Do You Pay GST on Staff Gifts?
Building a culture of encouragement and recognition within the workplace is important for you as an employer. Monetary bonuses are forgotten by your staff as soon as they spend the money whereas a gift of appreciation is something that will remind them over and over again that they are a valued part of your team.
This can get expensive, especially if you have a large staff. Giving gifts to your staff makes them feel valued and makes you very happy, so you're determined to give them a great Christmas!
You're probably wondering if you have to pay GST on staff gifts. You may also wonder what are the choices for celebrating and if Christmas gifts to staff are tax-deductible.
Here's the go-to guide you've been looking for on the tax implications of staff Christmas gifts.
Staff Gift Ideas and Tax Implications
The Christmas season is one for gift-giving and sharing the message of appreciation and caring. It's almost here and it's time to start thinking about celebrating the season and about gifts for staff. You are most likely considering a Christmas party and weighing your staff Christmas gifts options.
As an employer, you want to provide these morale boosters, but you do have to consider your bottom line. This includes the tax implications of the type of celebrations and gifts you offer.
What If You Have a Staff Christmas Party?
COVID restrictions aside, you need to take into consideration something the government calls a Fringe Benefits Tax (FBT) as well as GST when making your decision.
Employers pay the Fringe Benefits Tax on benefits they provide to their staff and even to their staff members' families. According to the Australian Taxation Office, FBT can apply even if the employer has the benefit provided by a third party. The FBT is applied to many things including:
paying private expenses
giving low interest loans to staff
providing a rental car
entertainment venues
other benefits above a certain cost threshold
You should know that holding a staff Christmas party is considered an 'entertainment' expense. This means that it:
Is NOT tax-deductible if it is under $300 per person and you will pay GST and can't claim an exemption
You will be required to pay FBT if the cost per person exceeds $300 since it's not a 'minor benefits' exemption
A 'minor benefits' exemption is one that is provided to staff or to staff and family on an 'infrequent' or 'irregular' basis. It must also be less than $300 per person.
The staff Christmas party that has the fewest tax implications for you would be a party that costs under $300 per person. You can have the party on your business premises and include family or you can have it off the premises. In either case, you won't pay FBT, but you also can't deduct the cost as an expense or receive GST credits.
H2: What Does ATO Consider An Entertainment Gift?
An entertainment gift can include many things:
Staff party
Movie tickets
Concert tickets
Airline tickets
Theatre tickets
Tickets to an amusement park
Sporting events tickets
Holiday accommodations
Club memberships
etc.
Answers
All these are subject to FBT (Fringe Benefit Tax) unless they are considered a minor benefit which is less than $300 (this includes GST) and is provided infrequently. If their cost is under $300 per person they are not tax-deductible and you are responsible for the GST. If their cost is over $300, they are tax-deductible and you will get GST credits, but you will have to pay the FBT.
Entertainment gifts have high tax implications when you consider that the FBT is 47% of the dollar value of the gift. For example, if you give a club membership to your staff of $400, you will pay $188 in tax per person. Even though you can claim GST and receive a tax deduction on the gift, you will not get that amount back in tax credits.
One way to get around this is to offer EFTPOS cards from TCN. Many entertainment venues around Australia accept these staff gift vouchers.
Do You Have To Pay GST On Staff Gifts?
The staff gift vouchers tax treatment depends on the amount of the gift as do any staff gifts.
If you give your staff gifts that are under $300 per person and are considered 'infrequent', you can claim tax deductions and you won't have to pay the Fringe Benefits Tax. You can also claim the GST in the next Business Activity Statement.
If you give Christmas gifts to your staff that are over $300, you do have to pay the FBT, but you can still claim the gift as a tax deduction and you receive GST credits on the gift.
Providing your staff with gifts of under $300 GST inclusive is the best option with the most tax advantages.
What Are Your Staff Gift Options?
Gift-giving traditions or giftology is becoming more popular in Australia. They promote goodwill, demonstrate appreciation, provide incentives, and build relationships. In the workplace, gifts from employers builds morale and a sense of belonging, and allegiance.
You want to give a gift that your staff will remember and appreciate. You want a gift that they will enjoy no matter what their tastes or preferences. At The Card Network (TCN), we have an option for you that will meet these needs: a gift card.
A gift card is not impersonal, not if you select the type of card that answers to the recipients' interests. You have so many cards to choose from at TCN. Your card selection can be tailored for each of your staff members and they get the gift of choice for where they use it.
Get Your Team a Gift They’ll Rave About
TCN cards are personalisable and your staff can use them all over Australia both in-store and online. You can also select physical or digital cards that are customized for your team.
With all these advantages including the fact that GST on staff gifts is fully refundable, what are you waiting for to get your Christmas gifts? Head to Our Corporate Page, or get in touch to find out how we can sort out your team with a stellar gift this year.
