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Non-monetary gifts to employees are likely to be “unclassified fringe benefits”, or UFB, under tax law.

Each employee is entitled to receive up to $300, including GST, worth of gifts per quarter, provided the total UFBs for your business does not exceed $22,500 including GST, in any 12-month period. Monetary gifts are not UFBs. They are additional wages and should be treated as such.

You may be entitled to switch from quarterly fringe benefit tax returns to annual ones. This could be useful if you want to make Christmas gifts worth more than $300. Those accounting for fringe benefits annually have a limit of $1200 per year per individual instead of $300 per quarter. This means you could make a gift worth $500, for example, and not incur fringe benefit tax, provided the employee didn’t get $1200 in one financial year.

Incidentally, if you exceed a threshold, such as the $300, the whole benefit is subject to FBT and not just the amount in excess.