- Gift cards are a tax-friendly way of showing your appreciation
- For tax purposes, they must be classified as non-entertainment gifts
- Gift cards cannot be given as remuneration for services
Christmas is all about giving and receiving, spending time with the people we value most, and showing our appreciation to colleagues and staff for a hard year’s work.
But handing out a bonus to staff comes with penalties for them – usually in the form of income tax. Some gifts are also liable for fringe benefits tax (FBT), which makes deciding what to give even trickier.
One way of showing appreciation, which is often overlooked, is the humble gift card – and it comes with tax benefits.
Players in the space include GiftPay, Prezee, Giftcards.com.au and Microgifts. Microgifts’ co-founder Nick Roche says gift cards generally don’t attract income tax and they’re usually not subject to FBT, payroll and super contributions.
“Millennials in particular want instant satisfaction. They want to be able to redeem their card wherever and whenever they want, and they want integration with digital wallets.”
“Broadly, a gift card that’s worth less than $300 falls under the ‘minor benefit exemption,” he explains, meaning if the gift card is given on an infrequent or irregular basis – and Christmas is such an occasion – then it qualifies as a minor benefit.
Tax-deductible up to $300
There are several other considerations when giving a gift card. The most important, for tax purposes, is to classify the gift card as a ‘non-entertainment’ gift (giving people movie and sporting tickets is generally seen as an ‘entertainment gift’). If the amount is less than $300, then it is generally fully tax-deductible, and no FBT needs to be paid.
“It’s also important to note gifts can’t be given as remuneration for services,” says Roche.
Roche believes accountants like digital gift cards because they let them control their spend. They can also be spent anywhere, with no restrictions, meaning staff are essentially choosing their own gifts.
“Millennials in particular want instant satisfaction,” says Roche. “They want to be able to redeem their card wherever and whenever they want, and they want integration with digital wallets.”