It is crucial to recognise achievements. Doing so can boost your team’s morale and move the company forward despite challenges that might come along the way. With that in mind, employers are turning to tax-free incentives for employees for several good reasons.
What are Tax-Free Incentives for Employees?
Giving incentives to employees is part and parcel of being an employer. It is a way to encourage better performance, and thus, it benefits both the company and the employees. What makes tax-free incentives for employees even better is that they are non-taxable.
Is there a catch? You need to take advantage of minor benefits exemptions under the Fringe Benefits Tax (FBT) laws in Australia. The next question is this: what makes it fall under a minor benefits exemption?
What is a Minor Benefits Exemption?
Two important conditions should be fulfilled for an incentive to be qualified as a minor benefits exemption:
- It should be unreasonable so that it would be treated as a kind of fringe benefit
- The value of the incentive that you have provided should be less than $300
Note that when you issue this type of incentive, say a $280 gift card, it shouldn’t be provided in conjunction with other incentives. If you give them the gift card, a certificate, a night’s accommodation, and free meals, you will have to compute the entire value of all of that, and it will be considered as the notional taxable value of the incentive you gave away.
That means if you want the exemption to apply to the incentives, the total value that you should be giving away (it should include every item that you provided), is less than $300.
On top of that, these perks, incentives, and gifts that you give away should be occasional and ad hoc. It can’t be the same monthly sales or production incentives that you give away or the ones that you have scheduled every quarter.
If you can qualify them as tax-free incentives for employees, you won’t have to pay Super, Fringe Benefits, PAYG, or other taxes. Since you may be including a gift card in these incentives, you can claim GST credit as well as tax deductions.
The bottom line here is that when you give away tax-free incentives for employees, there is no tax deductible for both you (the employer) and the employee. This deal is the perfect win/win for both parties involved.
Reasons for Recognition
You may have to give reasons for recognising your employees. You don’t need to make them up as you. In fact, there are many possible reasons you should give ample recognition to your staff and crew from time to time.
Here are some suggestions:
- Appreciation for an employee who is moving to a different industry/company
- Recognition for closing a new deal with a client
- Recognition for obtaining a new big client
- Passing certain qualifications/examinations by the government
- Providing great customer service and being commended by a certain number of customers
- Reaching a sales milestone that no one has ever before reached
- Completing one of the toughest projects this year
By giving away recognition certificates, you prove an ad hoc incentive, and by keeping the reward less than $300, you are qualified for tax exemptions, which is why these employee rewards benefit everyone.