Staff gifts, events and their deductibility

Jarrod Kemp • January 22, 2025

At this time of year businesses may have spent money towards employee gifts and/or events, this can lead to two potential tax issue arising from these expenditures. These issues are income tax deductibility and fringe benefits tax (FBT).

There are some important definitions to consider related to staff gifts or events, the main definition being whether the gift or event is considered as entertainment. Per the Income Tax Assessment Act (ITAA) 1997, Section 32.10 –

(1)          Entertainment means:

(a)  entertainment by way of food, drink or recreation; or

(b)  accommodation or travel to do with providing entertainment by way of food, drink or recreation.

 (2)         You are taken to provide entertainmenteven if business discussions or transactions occur.

Note:  These are some examples of what entertainment is:

 These are some examples of what entertainment is not:

  •  meals on business travel overnight
  •  theatre attendance by a critic
  •  a restaurant meal of a food writer.

So based on the ITAA definition, if your gift or event is classified as entertainment, it is not deductible towards your business and any GST credits are also not claimable. The next issue that arises from gifts and events is possible FBT consequences.

If the expense towards employee gifts or events is a minor benefit (below $300 per person), generally FBT will not be relevant. If you are unaware of FBT or how this may affect your business regarding employee gifts or events, feel free to contact our office regarding this, as this can be a very complex area of legislation.

Some examples of the above are as follows:

Gifting an employee a voucher at the end of the year of $100, this expense would be exempt from FBT as it is considered a minor benefit (provided it is not a regular occurrence) and would be deductible to the business as it is not considered to be entertainment. The GST credits will also be claimable as it is a deductible expense (where applicable).

Providing food and drink to employees for a Christmas party (providing the average cost per head is less than $300) would not be deductible to the business as this is entertainment, FBT is most likely not relevant due to this being a minor and infrequent benefit to the employees.

You offer a golf day to employees, associates and clients, held on a weekend and the cost averages out to $320 per person, this is entertainment as it is a social function, therefore no tax deduction is available and as it is no longer considered a minor benefit, FBT will apply to the costs associated with employee participation.

As you can see, there are many factors that can affect whether staff gifts or events are considered entertainment, deductible or subject to FBT, please contact our office so we discuss this with you if you are unsure.

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