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With the fiscal year in Australia ending 30 June, businesses want to know: Are the employee rewards we’ve been handing out taxable?
The answer is: Yes and no. It all depends on the value and type of reward.
Employee reward programs are a valuable way to recognise and reward staff for their performance, achievements and contributions and, generally, they are taxable. This is because any rewards or benefits given to employees—whether in cash or some other form—are typically subject to income tax and national insurance contributions.
There are exceptions
Depending on the type of reward or benefit you give your employees, there are some exceptions. So, if you want to show your employees some appreciation with a reward that isn’t subject to tax, keep reading. (For more info, check out the website page from the Australian Tax Office).
Exception #1: Long service awards
Recognising service of 15 years or more, long service awards are not only a nice thing to do, but they are tax-exempt—provided the value of the award doesn't exceed a specified maximum amount of $1,000. If the award is simply a fringe benefit, however, the value of the award would be taxable.
If the first long service award received by an employee recognises a period of service greater than 15 years, the maximum value increases by $100 for each additional year. For example, the maximum value for a first award recognising 20 years of service is $1,500.
If you’ve already given an employee a long service award (that is, in recognition of 15 years or more service), the maximum value of any subsequent award is $100 for each year more than 15 years.
Note: If the value of the award exceeds the relevant maximum value, no part of the award is exempt.
Exception #2: Minor benefits
Minor benefits are also tax-exempt benefits, and must meet both of the following conditions:
- Each is less than $300 in value (FYI, before 1 April 2007, the amount was less than $100)
- Each cannot reasonably be classified as a fringe benefit
Would some examples help?
It’s common practice for employers to give employees gifts on special occasions, such as the winter holidays. A single gift to each employee of, say, a bottle of whisky or perfume would be an exempt benefit—if the value is less than $300. If the gift is provided at a holiday party, the gift would be considered separately from the party when considering the minor benefits threshold.
Flowers given to employees on special occasions—if given on an irregular and infrequent basis—are also considered minor benefits. This could include flowers given to an employee on the birth of a child, for a birthday or as a get-well gift. Again, to be tax-exempt, the value would have to be less than $300 and it would have to be unreasonable to treat the benefit as a fringe benefit.
Here are more examples of benefits that are likely to be exempt under the minor benefits rules (if both conditions above are met):
- Welcome gifts provided to new employees
- Meals provided on an ad hoc basis to an employee—up to three times a year, each with a maximum value of $75
Cash gifts or bonuses are processed through the payroll and treated like salary and wages. Gift cards, however, are not. If they meet the minor benefits criteria, gift cards are tax-exempt. Plus, gift cards provide a host of other benefits (both for you and your employees), as you’ll see in the next section.
Suggestion: Reward with gift cards
While tax exemptions can make rewarding employees more rewarding for businesses, there are also ways to give better rewards—like giving gift cards.
Whether you’re looking to reward before 30 June or looking for smarter, more motivating rewards for the following fiscal year, gift cards can’t be beat. Since everyone loves gift cards, they make rewards more meaningful—and it’s often better to give experiences vs. just giving cash.
Additionally, with the growing popularity of spend-anywhere and multi-brand cards, and with both digital and physical form factors now widely available, gift cards can take the heavy lift out of giving. You get a one-size-fits-all solution, and you get to reward your employees or customers faster.
Let’s finish this blog with a few gift card suggestions from the hundreds of options provided by Blackhawk Network (BHN):
ACTIV Digital Visa eGift Card1
This card can be used in-store (when added to mobile wallet) online, over the phone or for mail orders wherever Visa prepaid is accepted. Order here.
Ultimate Everyone Gift Card2
Give the gift of choice from a wide range of leading retailers. Order here.
Single-brand cards
Gift cards from Australia’s favourite brands, like Myer, Jb Hi-Fi, Apple, Woolworths, etc. Order here.
Order now
When you’re ready to top off your EOFY by rewarding with gift cards, go to the BHN Corporate Card Store. You can give employees plenty of choice, choose from physical or digital gift cards and easily order in bulk.
1. The Activ™ Visa Digital Gift Card ('Card') is issued by Heritage and Peoples Choice Limited pursuant to a licence from Visa Worldwide Pte Limited. For full terms and conditions, visit https://activgiftcard.com.au/terms-conditions.
2. Blackhawk Network (Australia) Pty Ltd, ABN 84 123 251 703, is the issuer of this card. For complete Terms & Conditions and current list of participating merchants, go to www.ultimategiftcards.com.au.
