News
With the holiday season quickly approaching, you’re probably thinking about how you can best reward and recognise your employee’s hard work… (with as minimal ATO and FBT attention as possible!) Let’s explore the tax treatment of some common gifts and incentives.
Gifts for your employees that cost below $300 are tax deductible to you as the employer, provided they are an “infrequent” and “non-entertainment”gift. So, what does infrequent and non-entertainment mean exactly?
There is an FBT exemption commonly referred to as the “minor and infrequent exemption” and this basically means that if you can keep the cost of the benefit under $300, and it’s not provided in a consistent manner it can be exempt for FBT. The same even applies to a Christmas party for example, if you can keep the cost per head to under $300, the entire function should be exempt from FBT (generally speaking of course!)
When it comes to gifts, birthday or Christmas presents are usually OK, provided you keep them to under $300 per head. Examples of non-entertainment gifts include gift vouchers, a bottle of alcohol, hampers, groceries, flowers, beauty products and computers.
If you want to maintain your tax deductible and FBT exempt status, the “entertainment” gifts are the ones to steer clear of. These include theatre, concerts, movie, theme park or sporting tickets, holidays, flights and accommodation.
A bonus can be a great way to reward your employees with some hard-earned cash. But! With bonuses come a number of things you need to consider from a tax perspective.
Bonuses are treated as ordinary income to your employees, just like their regular salary or wages. This means it is fully taxable to them, so you’ll be required to withhold tax on the bonus and it must be reported to the ATO via the normal STP channel. This means it’ll show on their usual end of year Payment Summary to be included in their tax return.
The other thing you need to consider is the potential super obligation – super is generally payable on bonus payments (the only bonus payment where super isn’t payable is a bonus in respect of overtime only). Therefore, super will also need to be paid on the gross bonus you pay your employees.
So if you want your employee to receive a neat $2,000 in their bank account, you may need to pay them a little more to allow for the tax you need to withhold, and the super that is payable. If this bonus might push them into a new tax bracket, you’ll also have to make sure you’re withholding the right amount or even not affecting their overall tax outcome heavily!
Gifts and bonuses can be a great way to incentivise, but they can be a little complex so it’s important to make sure you do the right calculations before diving into this kind of incentive.
If you’re looking at rewarding your staff, now or in the future, get in touch with the Attune team to make sure you get the best outcome for both your business and your employees. Call 1300 866 113 or send us an email to start the conversation.
