Business staff prefer gift cards as a convenient and top-notch alternative to bonuses and physical gifts. Not only are they tax-friendly, often exempt from income tax of up to 47%, but they also ensure employees receive the total value of their reward. Unlike bonuses integrated into salaries, gift cards bypass taxation, maximising employee benefits.
In Australia, employers must pay Fringe Benefits Tax (FBT) at a 47% rate on certain employee benefits beyond regular pay. However, staff Gift Cards can often be tax-free for employees and exempt from both FBT and payroll tax for the business. How can this be done?
Here’s how MicroGifts will help level-up your employee rewards:
Unlocking FBT Gift Card Tax Rules in Australia:
When employers purchase vouchers or gift cards for employees, broadly gifts need to be valued at less than $300 to fall under the Minor Benefit Exemption, these gifts also need to be issued on an infrequent or irregular basis.
Unlocking the Power of the Minor Benefit Exemption with Gift Cards
The Minor Benefit Exemption offers a fantastic opportunity for businesses to provide tax-free gifts to their employees, but understanding the rules is vital. Here’s a breakdown of how you can leverage this exemption to your advantage:
- Keep Gift Card values under $300 and give them out infrequently to qualify for full tax deductibility without facing FBT liabilities.
- Avoid entertainment gifts like movies or sporting tickets, as they don’t fall under the exemption.
- Plan your Christmas party wisely by keeping costs per person under $300 and ensuring it’s only one event per year .
- Reimburse business expenses such as work-related travel, generally FBT exempt.
- Reward safety achievements with awards valued under $200 or long service with prizes up to $1,000, both FBT exempt.
Remember, rewards shouldn’t be considered remuneration to qualify for the exemption. Here are some brief tips for structuring your Reward & Recognition Programs:
- Keep individual gifts below $300.
- Recognise exceptional behaviours and infrequent milestones like birthdays and work anniversaries.
- Implement programs across teams and establish clear criteria for recognition.
- Encourage peer nominations to showcase recognition beyond typical work outcomes.
- If your budget exceeds $300 per person, consider spreading it across multiple categories or milestones to stay within the exemption limits.
By following these simple guidelines, you can easily build an effective reward and recognition program. Of course, it’s always wise to seek tax guidance from a professional MicroGifts’ online platform for sending and tracking employee rewards saves on admin, but also allow FBT reporting on Employee Rewards & Gifts in one report.
If you would like to learn more, call us now on 1300 000 889 or Request a Quote.
Download our free Gift Card FBT Guidelines information sheet