Are gift cards tax deductible?
Gift cards are a popular choice for businesses looking for gift giving options for staff and customers, as they allow recipients to choose their preferred reward or experience. However, when it comes to tax implications, questions arise regarding the deductibility of gift cards. In this article, we share links and cover some of the tax rules surrounding gift cards in Australia and New Zealand, specifically focusing on whether they are tax deductible.
It is important to note that the views below are not recommendations, and you should seek professional advice, whether personal or business-related, regarding the tax implications of Visa gift cards.
Are gift cards tax deductible?
Are gift cards taxable income in Australia?
No, corporate prepaid gift cards are generally not considered taxable income in Australia. According to the Australian Taxation Office (ATO), receiving a gift card does not constitute income for the recipient. Therefore, individuals who receive gift cards do not need to declare them as income when lodging their tax returns.
Are gift cards taxable income in New Zealand?
If you look at giving gift cards to employees, they are generally considered taxable income and subject to PAYE (Pay-As-You-Earn) deductions. The value of the gift card is added to the employee’s income and taxed accordingly.
Do I have to declare gift cards?
As mentioned earlier, if you receive a gift card for a birthday or from family, they are not considered taxable income, so you do not need to declare them on your tax return. However, if the gift card if given as a reward for work or as part of a business-related transaction, it might be subject to fringe benefits tax (FBT) or other tax obligations. For most businesses, it is advisable to consult internally with our finance team, with a tax professional or refer to the ATO & IRD guidelines for specific situations.
Are Christmas gifts for staff tax deductible?
Visa gifts cards given to staff as Christmas gifts in the holiday season fall under the category of entertainment gifts. Generally, entertainment gifts provided to employees are subject to FBT and are not tax deductible for businesses. However, there are exceptions for minor benefits, where the cost per gift does not exceed a certain threshold. To determine the tax implications of Christmas gifts, it is recommended to consult the ATO’s and IRD’s guidelines or seek professional advice.
According to the ATO , ““The provision of a gift to an employee at Christmas time or other times may be a minor benefit that is an exempt benefit where the value of the gift is less than $300.”
This means that no FBT is payable if your gift is less than $300 inclusive of GST. You can also make a tax deduction for “non-entertainment gifts”.
In New Zealand the IRD details, “You can provide an employee with up to $300 of gifts and prizes, subsidised or discounted goods and services each quarter and not pay FBT. As soon as you go over this limit the full value of the benefit is subject to FBT”
Are gifts to clients tax deductions in Australia and New Zealand?
Gifts cards given to clients are considered business-related expenses and may be tax deductible in Australia. However, it is essential to note that not all gifts are tax deductible. The ATO distinguishes between entertainment and non-entertainment gifts for tax purposes. Non-entertainment gifts, such as gift vouchers or items not related to entertainment activities, are generally tax deductible. On the other hand, entertainment gifts, which include tickets to shows, sporting events, or holiday packages, are subject to specific rules and may have limited deductibility. It is advisable to keep accurate records and consult the ATO or a tax professional to understand the particular tax treatment for gifts provided to clients.
In New Zealand, gifts to clients can be tax-deductible under certain circumstances. The IRD allows tax deductions for business expenses incurred in the ordinary course of carrying on a business. Gifts to clients can be considered a legitimate business expense if they are made for the purpose of promoting or maintaining the business.
To qualify as a tax deduction, conditions must generally be met. As tax laws can be complex and subject to change, it’s recommended to consult with a qualified tax professional or the Inland Revenue Department for specific guidance regarding your situation.
It’s important to note that entertainment expenses, such as tickets to concerts or sporting events, generally do not qualify for tax deductions in New Zealand.
The Wrap Up
In Australia and New Zealand, gift cards or reloadable Visa cards fall into different tax categories depending on their nature and purpose. Understanding the tax rules can help individuals and business owners plan their gift giving while considering the tax implications.
The means that while gift cards are not considered taxable income, their tax deductibility depends on various factors such as the gift’s nature, the recipient’s, and the gift’s purpose. It is important to consult the relevant tax authorities or seek professional advice to ensure compliance with tax regulations and maximise any potential tax benefits.