Many client gifts in Australia are tax deductible as long as they are not classified as entertainment or personal.
A gift designed to generate future business, such as a branded item or a gift voucher, can be claimed as a business expense if it meets these criteria. It's crucial to ensure the gift is not considered entertainment, which would include event tickets or holiday trips.
However, gifts like helicopter tour gift vouchers are typically tax deductible in most cases, provided they are intended to generate more income in the future and strengthen client relationships.
Types of Gifts to Clients That Do Not Qualify for Tax Deduction
In Australia, there are two main types of gifts to clients that do not qualify for tax deductions. These include entertainment and personal gifts.
Personal Gifts
First, gifts given to a current or former client that are of a personal nature or are given for personal reasons do not qualify.
For example, if you give a $200 gift to a family member because they spent $500 at your business, but you usually only engage in client gift giving when they spend over $1,000, then this would be seen as a personal gift.
According to the Australian tax office, this is not a tax deductible gift.
Entertainment Gifts
Unfortunately, not all gifts qualify for deductions, even though many businesses choose to provide these types of gifts to their clients. Generally speaking, entertainment relates to the immediate consumption of the item of property.
Some examples of gifts that don't qualify include tickets to the theatre or sporting events, cruises, holiday accommodations, hot meals, hired entertainment, and hired sports equipment.
Interesting to note however is that even though hot meals do not qualify, other related items, such as a bottle of wine or a case of beer do.
What Gifts to Clients Are Tax Deductible in Australia?
The general rule is that a gift is tax deductible if the purpose of it is generating future assessable income as per a qualified tax professional.
The bottom line is that if you provide gifts to clients, they must be related to the business and it must be for the purpose of securing client relationships and generating more income for your business in the future.
For example, flowers and gift hampers are fairly standard client gifts which are deductible. Non entertainment gifts, as long as they are not of a personal nature, should generally qualify for a tax deduction.
Although it might sound odd, something like a helicopter tour is tax deductible as long as the capital nature of it is focused on generating future business.
Scenic helicopter tours given with the intention of solidifying client relationships and securing future business from them qualify.
Are Client Gifts Subject to FBT?
Luckily, any gifts to clients, suppliers, and vendors do not come with any FBT obligation. Only gifts given to employees come with such an obligation.
The fringe benefits tax is something that employers must pay when giving gifts to employees (depending on the nature of the gift).
Are Gift Vouchers Tax Deductible in Australia?
Again, gift vouchers can be deducted as a business expense so long as they meet the criteria as set out above.
This means that a Rotor One gift voucher for a scenic helicopter tour is a perfect option. It's not subject to the Fringe Benefits Tax FBT.
Are There GST Obligations on Client Gifts?
However, some gifts may be subject to GST, although this is not so in the case of face-value vouchers given to clients and customers.
As long as the voucher has a monetary value stated on it, the amount paid does not exceed the stated monetary value, and when redeemed, the recipient is entitled to supplies or product up to the monetary value stated on said voucher.
Explore our tax deductible gifts for clients in Melbourne or Sydney.
