39 – Low dollar value employee gifts
Low dollar-value and irregular gifts can be provided by employers to employees without an FBT charge for the employer or an income tax charge for the employee. This a is materiality rule. The ATO, or at least the legislature, recognizes the reality of day to day business life and employment relationships and is basically saying “we are not concerned with irregular low dollar value gifts and will not seek to tax them in any way”.
Gifts are a great way to lift employee morale and show appreciation of effort. Employees respond more to empathy and appreciation than just money. A $299 shopping voucher for each employee at Christmas, with a nice note, and some public recognition is a nice way to say “thanks, we appreciate you”.
And its tax free, which makes it even nicer.
Other ideas include a bottle of spirits, perfume, a food hamper, a CD, a book or a clothes or toy shop voucher. The gift does not have to be consumed at work, and there is no reason why the employee cannot “re-gift” the gift to someone else who may appreciate it even more. Read here for some practical tips on re-gifting unwanted presents.
Westfield vouchers are a great idea. A Westfield voucher is almost as good as cash. Your staff can spend the voucher on almost any product or service available in any Westfield centre in Australia. This takes away the risk of getting it wrong and is appreciated more by your staff.
What does the ATO say?
The ATO says any one gift must be “modest in value”, valued under $300 per gift, and must not specifically relate to the employee’s work performance. There should be no more than four special occasions (ie gifts) per employee per year.
This means if you have, say, three staff you could provide gifts with a market value/cost of about $900 each and a total market value/cost of $2,700 a year. This is a great way to show your staff you care and you appreciate their good efforts. Birthdays and the Christmas and Easter breaks work well, but its never a bad time to show your appreciation.
You can read the ATO’s views on minor benefits here: ATO view on the minor benefits exemption.