Which employee gifts are tax exempt?
Can you buy gifts or vouchers for your employees without incurring fringe benefit tax or PAYE? Learn what you can buy and how much you can spend without having to pay FBT or add it to your employees’ remuneration.
Whether it’s for reaching a sales target, a birthday, Christmas or just to say thanks, sometimes you want to buy gifts for your employees.
Although it’s a nice gesture, as a business owner it can be unexpectedly complex to provide staff perks. Perks like subsidised gym memberships and discounted products will attract fringe benefit tax, while cash and cash-redeemable vouchers are taxed as part of PAYE.
Any cash, or vouchers redeemable for cash, are taxable
A gift that comes in the form of cash, or that can be exchanged for cash, is considered part of your employee’s total remuneration. That means it must go through your usual payroll system.
The value of gifts must be below $300 a month or $1,200 a year to be exempt from FBT
There is an exemption for employer gifts, provided they stay below a certain value threshold.
You can give your employees vouchers, prizes or gifts up to a certain value without triggering an FBT liability, if:
The value of the gifts does not exceed $300 in a quarter for any one individual.
Or, if you file annual returns, the maximum is $1,200 each year for an employee.
The maximum exemption you can claim is $22,500 each year, across all your employees.
There are a few other exemptions, including uniforms, car parks and membership reward schemes that can also be provided to employees without you needing to pay FBT.
Once you exceed the exemption threshold, you will trigger an FBT liability.
We can help with FBT questions
Rewarding employees can be complex, whether it’s company vehicles, vouchers, discounts or insurance policy contributions. We can help you navigate the tax landscape and help you know when tax will and won’t apply.
Get in touch, we’d love to hear from you.