As a business owner, the end of the year often means tying up loose ends, planning for the new year, and – let’s be honest – looking forward to a well-earned break. While it’s important to recognise the hard work of your team, it’s equally essential to acknowledge your own efforts, especially if you’re a shareholder-employee.
There’s a tax-friendly way for shareholder-owners to give themselves a little financial lift at Christmas by using gift cards. Here’s how you can do it right, staying within the rules.
A Tax-Deductible Reward for Business Owners
Small benefits up to $300 per quarter for each employee (and yes, this includes shareholder-employees) are allowed as tax-deductible expenses under the unclassified fringe benefit rule. This provides a unique way for business owners to give themselves a quarterly perk that’s fully tax-compliant and deductible, provided it’s under $300 per quarter.
By setting aside this small benefit, you can take a little pressure off personal expenses during the holiday season.
Making the Most of the Gift Card Allowance
To make sure you’re fully compliant while using this benefit effectively, follow these key steps:
Stay Within the $300 Cap: Keep each gift card’s value at or below $300 per quarter for each employee. For you, as a shareholder-employee, this means you’re eligible for up to $300 each quarter as well. If you don’t use it in one quarter, it doesn’t roll over—so be sure to plan each quarter to get the most benefit.
Keep a Record: Like any tax-deductible expense, documentation is essential. Record the date, amount, and purpose of the gift card in your business records to demonstrate it’s within the tax-deductible limit.
Use It Strategically: This allowance is a great way to cover a few personal or holiday expenses. It might help with gift shopping or even a meal out to celebrate the season with family, making it a welcome boost around the holidays.
Don't get caught out by GST or the Entertainment rules: Don't claim GST on your gift card purchases, they don't have a GST component. Also, don't buy vouchers for goods or services that clearly fall into the entertainment rules, because they may only be 50% tax deductible. So avoid liquor stores and restaurants.
Why This is Tax-Compliant
IRD allows for minor, irregular benefits to be given to employees without triggering Fringe Benefit Tax (FBT) if they meet specific criteria. These benefits are capped at $300 per quarter per employee, making them a deductible expense and therefore reducing taxable income.
As a shareholder-employee, you are technically employed by your business, which qualifies you for this small benefit exemption.
This doesn’t mean additional salary or a taxable dividend; it’s simply a recognition of the contribution you make, structured as a compliant business expense.
How This Works in Practice for Business Owners
Let’s say you choose to purchase a $300 gift card in December for yourself as a shareholder-employee.
This gift card:
Is Deductible: As long as it’s within the $300 quarterly limit, it can be deducted as a business expense.
Is Exempt from FBT: Because it’s below the quarterly cap, it doesn’t trigger additional FBT costs.
Is Ideal for the Holidays: December is a great time to use this benefit to cover holiday or personal expenses.
A Balanced Approach to Recognising Hard Work
At the end of the day, this $300 allowance is a simple but effective way to reward yourself and your team while staying tax-compliant. It’s a great way to make the season a little brighter without stretching the budget.
If you’d like to know more about maximizing your benefits as a business owner, talk to us. We can help you navigate the rules and find ways to stay tax-smart while supporting your personal and business success.
Make an enquiry now to see what we can do together.
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