4 December 2023

A Tax Compliant Gift-Giving Guide to Your Company’s Holiday Season

a group of people taking a photo

The holiday season is everyone’s favourite time of year. Full of joy, celebration, and a spirit of giving, it’s the perfect opportunity for companies to express gratitude toward their teams, clients and partners by providing a variety of gifts – in various forms.

However, not to be the “fun police”, but these gifts are often considered fringe benefits. And when it comes to fringe benefits, there are several taxation rules and regulations to consider to ensure that your business remains compliant amidst the festive cheer.  

The Australian Taxation Office (ATO) does it’s best to provide details regarding the regulations surrounding the Fringe Benefits Tax (FBT), however, this can be complex and confusing. That’s why in this guide, we’ll navigate various details and nuances that may impact how you plan for your company’s holiday season to ensure you remain compliant with regulatory guidelines – and don’t unknowingly set yourself up for a huge FBT bill! We’ll also throw in a few extra tips and tricks as well to ensure you make the December period a season to remember. Fringe benefits tax explained The Fringe Benefits Tax (FBT) is a tax paid by Australian employers on benefits they provide to their employees, their employees’ families or other associates. 

According to the ATO, employers are responsible for ensuring that they self-assess their FBT liability and lodge an appropriate tax return.

While fringe benefits can range from cars and accommodation to entertainment and property, let’s take a look at how these regulations might impact your businesses during the holiday period specifically. More specifically, when it comes to gifts!

Christmas Parties and Gifts

Christmas parties are a true highlight of every company’s December (or even November) calendar. When it comes to hosting a Christmas party for your organisation, here are some things to keep in mind:

1. On-site Christmas parties 

If your business holds a Christmas party on a working day on your business premises, to which only your current employees are invited, you typically won’t incur FBT for the catering, that is food and drinks, provided.

2. Off-site Christmas parties 

However, if the party is held off your business premises or includes associates of employees (such as their partners), this is considered to be a minor benefit. That said, if the cost per person is less than $300, you won’t be required to pay any FBT. Further, when the Christmas party involves clients or other businesses, the FBT does not apply to the costs associated with them. However, it’s important to note that if your Christmas party is not subject to FBT, income tax deductions cannot be claimed.

3. Christmas Gifts and Bonuses

Whether it’s in a Kris-Kringle style or just a simple thank you for your team, gift-giving during the festive season is a common practice. As such, it’s important to know that if you give your employees a Christmas gift, the FBT is not applicable if the value of the gift is less than $300 per person. It’s also worth noting that when it comes to personal gifts for family and friends—these are not tax-deductible

Charitable Contributions and Donations

Beyond gifts, the holiday season also sparks a spirit of charitable generosity, so it’s crucial to understand the tax implications of any charitable contributions your organisation makes. 

You can only claim a tax deduction for a gift or donation to an organisation that has the status of a deductible gift recipient (DGR).

To claim a deduction, you must be the person or company who voluntarily donates the money or property to the registered DGR. However, contributions that provide you with personal benefit, even if the funds go to a registered charity are not tax-deductible. This could include buying:

  • Raffle tickets, chocolates, mugs or keyrings with a price.
  • Payments for school building funds with benefits.
  • Payments for previously agreed-upon benefits.
  • Gifts to family/friends, any reason.
  • Donations via salary sacrifice.
  • Donations through a will.

Overall, ensuring that your contributions align with ATO guidelines not only supports noble causes but also provides your company with valuable tax benefits. To ensure you are protected, it’s best to keep records such as a receipt or a signed letter of confirmation for all of your tax-deductible gifts and contributions before speaking with a trusted expert, like Dexterous.

Bonus business tip for December 

Beyond tax regulations, it’s also important to make some strategic cost-effective decisions to ensure December and the rest of the holiday period remains a profitable and successful time for your business. For example, there are a huge number of countries that have a fiscal year ending 31st of December, including the US. This means that clients from these countries often make advance purchases in December to spend their outstanding budgets. Understanding these patterns will help you to target certain clients during this month, or simply use strategies that improve efficiency such as pre-billing. Beyond this example, it’s also worth keeping an eye out for various other specials and deals that are common around the December period.

Are you looking for experts to guide you through the holiday period with specific financial advice and guidance? 

Dexterous can help. As the holiday season approaches, businesses have the opportunity to spread joy and appreciation among their teams and clients. However, it’s essential to navigate the regulatory landscape effectively to save unnecessary stress and costs down the line. That’s where our team of finance specialists can help. At Dexterous, we provide an outsourced, customisable finance department solution that works for you. We can leverage our financial expertise to guide you through the intricacies of holiday planning, ensuring your celebrations align with ATO regulations while maximising the joy and impact of the season. But beyond personalised holiday advice… 

Our expert finance team can help you proactively manage your Christmas incentive and bonus strategy too

At Dexterous, we provide a comprehensive managed finance solution. This means that we leverage all the latest business tools, access global talent and manage your company’s Christmas bonus structure with the local expertise of our Sydney team. We also equip you with a strategic approach and cost-effective function not just to address your incentive and bonus issues today, but to maintain an effective strategy that will remain viable amidst the challenges of a potential recession. Reach out to Dexterous and transform your finance department today. For more information, get in touch with us today or connect with us via LinkedIn.