So, you love your staff (well, we hope you do) and you want to throw them the best Xmas bash ever. But how do you make sure you’re being clever with your accounts while still celebrating the silly season? Here’s the breakdown of FBT and tax deductions for Christmas parties, so you can dance like no one’s watching (especially the ATO).
CHRISTMAS PARTIES AND FBT
If you’ve never thrown an Xmas party or you’re changing the way you celebrate Christmas with your staff, you may assume that parties or gifts are tax deductible. However, there are tax implications for certain types of festivities which may not be tax deductible or may be subject to FBT.
In a nutshell, the costs involved with your work Xmas party are income tax deductible only to the extent that they’re subject to fringe benefits tax. Any costs that are deemed exempt can’t be claimed as an income tax deduction.
Your work Xmas party will be exempt from FBT if:
If your party requires your business to pay FBT, you will likely also receive a tax deduction for the cost of the party.
Other circumstances where you’ll be exempt from FBT include parties that are held at a venue other than your workplace (function venue, bar, restaurant etc) and parties which extend the invitation to your employee’s family or friends. These parties are classed as a minor benefit and are therefore exempt from FBT — when the cost per head is less than $300.
CHRISTMAS GIFT GIVING
Buying your employees gifts can also be deemed a minor benefit when the gift value is less than $300. Most SMEs would stay within this range and are therefore exempt from FBT.
If a gift is given to an employee at the Christmas party, both the gift benefit and the party benefit need to be considered. The total for both benefits must be less than $300 and the conditions of a minor benefit must be met, to allow for exemption.
Also keep in mind that gifts for clients aren’t subject to fringe benefits tax — and are therefore tax deductible (whatever the price tag).
Drinks, food, entertainment and gifts – there’s really no time quite like Christmas at a workplace. And regardless of how big or little your office Christmas party plans are it’s important to consider the ways in which you can best manage your expenditure over the festive season.
If you’d like some advice on Fringe benefits tax and Christmas parties, connect with our team at Meridian Accounting by calling our Rockhampton office on (07) 4927 4625 or our Emu Park team on (07) 4938 8262.
* The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organisation, employer or company.