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Maximizing Tax Benefits through Corporate Gifting: What to Choose and How Much to Spend on Corporate Gifts.

Maximizing Tax Benefits through Corporate Gifting: What to Choose and How Much to Spend on Corporate Gifts.

February 07, 2024 | Corporate Gifting

Corporate gifting is a practice that can greatly influence your client's perception of your business and strengthen your business relationships. The cost of the gift often communicates the importance you place on the relationship, and can also reflect the recipient's organisational level. While taking a client out to lunch or dinner can be a nice gesture, it is often forgotten shortly after. Therefore, many businesses choose to invest in thoughtful and tangible gifts that leave a lasting impression. 

Based on experience, businesses in Australia generally spend between AUD $55 and AUD $250 on corporate gifts. The amount spent tends to vary depending on the recipient's position within the organisation. For junior-level employees, gifts typically range from $55 to $85. Important clients and mid-level employees may receive gifts in the range of $100 to $115. Executives usually receive gifts in the range of $100 to $150, while VIPs, valued clients, or top management may receive gifts in the higher range of $150 to $250.

In terms of tax benefits, it's important to understand the guidelines set by the Australian Taxation Office (ATO). When it comes to employee gifts, items below $300, including GST, are generally considered tax-deductible expenses, as long as they are non-entertainment gifts. Non-entertainment gifts include items such as gift boxes, alcohol, flowers, beauty products, and gift certificates. On the other hand, entertainment gifts, such as restaurant meals, movie tickets, sporting events, holidays, and accommodation, do not fall under the tax-deductible category.

For non-entertainment gifts under $300, businesses can claim a tax deduction, and there is no Fringe Benefits Tax (FBT) applicable. However, gifts exceeding $300 may be subject to FBT, although they are still deductible. It's essential to consult with a tax advisor to understand the specific implications for your business, as FBT and income tax implications can vary based on the cost and types of Fringe Benefit Tax elections made.

When it comes to gifting suppliers and clients, the $300 limit for tax deductions does not apply. Generally, gifts given to suppliers and clients should be tax-deductible. Remember to claim the Goods and Services Tax (GST) inputs on your next Business Activity Statement (BAS) to ensure you benefit from the appropriate tax considerations.

It's worth noting that tax laws and regulations can change over time, so it's crucial to stay updated and consult with a tax advisor to ensure compliance with the latest guidelines. The fringe benefits tax guide for employers, particularly sections 1.6 (GST) and 1.7 (income tax), provides relevant information that can help you navigate the tax implications of corporate gifting.

Understanding the tax benefits and guidelines associated with corporate gifting in Australia is crucial to make informed decisions. Remember to consult with a tax advisor to ensure compliance with current tax laws and regulations.

If you require assistance or have further inquiries regarding corporate gifting, you can reach out to us at [email protected] or call us on 1800 867 158. We offer a free consultation to discuss your unique corporate gifting needs. Additionally, you can explore our corporate gifting page to learn more or enquire.

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