The most common questions we get this time of year are around what is and isn’t deductible in entertainment and gift giving.
In November 2010, Clive Palmer reportedly gave 750 long term employees of the Yabulu Refinery luxury overseas holidays for two for Christmas. Fifty of his most valued employees received a new Mercedes Benz.
Rather generous. For most businesses gift giving is all about appreciation in a tax effective manner.
Whilst Mr Palmer was certainly generous I am not sure if he thought the tax bill from the ATO for FBT was so generous. Therefore if you want to avoid the tax bill from your Christmas generosity to your employees you need to:
1. Ensure that the gifts are less than $300 per employee
2. Ensure they are on an ad hoc basis- if you give the employee a $150 voucher every month this would not be seen as ad hoc for the ATO
If the above is adhered to it will be considered a minor benefit and therefore exempt from FBT.
If the gift is for a client, gifts are deductible as long as the gift is given by the business with the expectation that the business will benefit (i.e., the gift is given with the expectation of generating revenue) over this level of the gift.
Entertaining your clients at Christmas is not tax deductible. So, if you take them out to a nice restaurant, to a show, or any other form of entertainment, then you can’t claim it as a deductible business expense and you can’t claim the GST credits either. It’s goodwill to all men but not much more.