Gifts provided to employees or their associates will typically constitute a property fringe benefit and therefore are subject to FBT unless the minor benefit exemption applies (any item valued at $300 or less is exempt from FBT).

And while gifts provided to clients are outside of the FBT rules, they may be deductible as a business expense (and deductibility may still apply even if the gift is a “minor benefit” under the FBT rules). Tax determination TD 2016/14 provides guidance on whether an outgoing incurred by a business taxpayer for a gift provided to a former or current client is deductible under the general deduction provisions.

The ATO confirms that such outgoings are generally deductible under s8-1 ITAA97 as they are being made for the purposes of producing future assessable income. However, the outgoing is not deductible where it is of a capital nature, relates to the gaining of exempt or non-assessable non-exempt income, or some other provision of the income tax law prevents it from being deductible. Readmore