Non-entertainment gifts for employees are fully deductible if the cost is less than $300 per employee and less than $300 for their partners (including GST). These include:
- Beauty products
- Gift vouchers
- Alcohol for staff not consumed on work premises
Non-entertainment gifts to suppliers and customers can be fully deducted, as long as they’re not excessive or have considerable value.
Entertainment gift costs for non-employees are not tax deductible at all and cannot be claimed for GST, no matter the amount or recipient. Entertainment gifts are mainly of a recreational nature and include:
- Tickets to shows or movies
- Sporting events
- Providing a holiday
Entertainment gifts provided to employees are deductible to the extent that FBT is paid on it.
This sounds really complicated!
You don’t need to make any adjustments at your end for GST or splitting out non-entertainment costs – your accountant will do that when the financial statements are prepared.
Why the limit of $300?
This is set by the ATO. Anything more than $300 (inc GST) is captured by the FBT regime (Fringe Benefit Tax). You really don’t want to go there…