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Gift or Income ?


In the April issue of CPA Australia’s “In The Black” magazine there was an interesting article on tipping - something you have never done if you have never eaten in a restaurant, taken a taxi, or had your bags taken to a hotel room by a porter.

The first time I visited the United States I was shocked to find bar staff who weren’t paid a wage at all – they lived on tips, but as a teenager I was equally shocked to hear the rumour that the doorman at one of Sydney’s leading hotels owned two rental properties at Vaucluse. The standard tip to him for whistling up a taxi or opening the car door for an arriving guest was 2 shillings!

We don’t have gift duty in Australia any longer. If you consider that a tip given to you in connection with your work is a gift and therefore not subject to tax, it wouldn’t be a good idea to ignore tips when you lodge your tax return. The ATO have never deviated from the view that tips form part of taxable income.

If conversation lags at your next dinner party see if you can reach consensus on whether waiters should get a tip, what the tip is for and how much it should be.

The argument will be quite vocal if the bill already has a “service charge” added.