Gift cards are the number one desired Christmas gift in Australia – and for good reason. Recipients love the flexibility & choice that gift cards provide, giving them the ultimate freedom to spend how they choose.
The benefit of staff gift cards also extends beyond Christmas, as they are a great alternative to bonuses or end of year physical gifts. In many cases, gift cards gifted to staff don’t incur income tax (applied up to 47%). This means employees can enjoy the full value of the Christmas gift. In many instances, staff Christmas gift cards can also save business costs as gift cards can be FBT, payroll tax & super contribution exempt.
When issuing staff gift cards, there are a few important exceptions that businesses need to be aware of in order to minimise exposure to FBT under “the Minor Benefit Exemption” tax rule.
The Minor Benefit Exemption
Broadly, Christmas gifts need to be valued at less than $300 to fall under the Minor Benefit Exemption. These gifts also need to be issued on an infrequent or irregular basis: Christmas is regarded as infrequent. Some important points to consider include:
- When purchasing Christmas gifts, ensure these gift items are categorised as “non-entertainment” gifts and cost less than $300, as the amount is generally fully tax deductible with no FBT payable. (Gifts like movie & sporting tickets are generally regarded as “entertainment” gifts.)
- Christmas Parties – To qualify, keep the cost per person under $300. Christmas party celebrations qualify for the minor, infrequent and irregular exemption as it is held on a yearly basis and will not attract FBT.
- If both the Christmas party and the Christmas gift are less than $300 in value for each individual staff member and all other conditions of a minor benefit are met, they will both be exempt.
- Health Workers have different FBT rules that may apply.
- Gifts must not be given as remuneration for services.
Generally, Christmas gifts are usually FBT exempt if they are below $300 and recognise Christmas as an infrequent occasion celebrated with as a genuine gift. Recognising staff with Christmas gift cards should be easy following these simple guidelines, however we strongly recommend that every business seek tax guidance from a professional tax advisor.