Business gift-giving: tax rules for clients and employees

As the song goes, “it’s the most wonderful time of the year” and you may want to show your appreciation by giving employees or clients gifts during the festive season.​

However, when a business gives a gift, two main tax questions arise:​

These depend on who the gift is for (employee vs client), the gift's nature, and the value.​

Gifts to employees and associates (e.g. family members) are tax-deductible, and in many cases can be exempt from Fringe Benefits Tax (FBT) if they qualify under the minor benefit rule.​

Where something is deemed to be a minor benefit, FBT won't apply, but the business can still claim it as a tax deduction.​

Examples of gifts that may qualify include Christmas presents or a gift for a special occasion.​

Giving gifts to clients at the end of the year is always popular and may help you retain clients and generate more income for your business. However, the tax treatment differs from employee gifts.​

Tax-deductible gifts for employees and clients​

Not tax-deductible as a client gift​

As a golden rule of thumb, stick to non-entertainment gifts that are less than $300 per person. This makes it simple to remember without having to consider the different tax treatment for employee vs client gifts.​

Happy gifting!!​