What is the taxation and accounting treatment of providing a watch to an employee in recognition of a 10-year work anniversary? what will be the implications from both the employee’s and employer’s perspectives including the application of Fringe Benefits Tax (FBT), income tax consequences and GST treatment?
Hi @SHhu,
Providing a watch to an employee for a 10-year work anniversary is likely to be subject to fringe benefits tax (FBT) unless the minor benefit exemption applies. The minor benefit exemption applies when the gift is infrequent, has a value of less than $300, and it would be unreasonable to treat it as a fringe benefit.
If the watch has a value of $300 or more, FBT will apply. As the employer, you'll be liable to pay FBT on the taxable value of the gift. The good news is that you can claim an income tax deduction for both the cost of providing the watch and the FBT you pay. You can also claim GST credits for the cost of purchasing the watch if you're registered for GST.
From the employee's perspective, if the watch is provided as a fringe benefit, they won't pay income tax on the value of the gift. However, if the total value of fringe benefits provided to the employee during the FBT year is substantial, the grossed-up value may need to be reported on their income statement as a reportable fringe benefits amount.
Hi @SHhu,
Providing a watch to an employee for a 10-year work anniversary is likely to be subject to fringe benefits tax (FBT) unless the minor benefit exemption applies. The minor benefit exemption applies when the gift is infrequent, has a value of less than $300, and it would be unreasonable to treat it as a fringe benefit.
If the watch has a value of $300 or more, FBT will apply. As the employer, you'll be liable to pay FBT on the taxable value of the gift. The good news is that you can claim an income tax deduction for both the cost of providing the watch and the FBT you pay. You can also claim GST credits for the cost of purchasing the watch if you're registered for GST.
From the employee's perspective, if the watch is provided as a fringe benefit, they won't pay income tax on the value of the gift. However, if the total value of fringe benefits provided to the employee during the FBT year is substantial, the grossed-up value may need to be reported on their income statement as a reportable fringe benefits amount.
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