FIRSTMATE BLOG: CAPTAINS LOG

Gifts of food or wine to employees30.09.2013

Question
An employer decides to give Christmas gifts of bottles of wine to some employees & Christmas food hampers to others.

How should this expenditure be treated for tax purposes?

Answer
Gifts in the form of entertainment (eg. wine & food) given to employees are subject to fringe benefit tax (FBT) because the employees can enjoy the gift when they choose.

The benefit will be an unclassified fringe benefit and will therefore not be subject to FBT if the exemption rules apply, namely, no FBT is payable if:

– The aggregate taxable value of unclassified benefits provided to each employee does not exceed $300 per quarter for employers paying FBT on a quarterly basis (or $1,200 per employee per annum for employers that pay FBT on an annual or income-year basis);

– The total taxable value for the past four quarters of all unclassified benefits provided by an employer to all its employees does not exceed $22,500 for employers paying FBT on a quarterly basis (or $22,500 for all employees per annum for employers that pay FBT on an annual or income-year basis).

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