The festive season is fast approaching, and if you are a business owner there’s a good chance that you’ll be planning some sort of Christmas party for your staff. Confused about the rules of what are tax-deductible expenses and subject to Fringe Benefits Tax in relation to Christmas parties and Christmas gifts for staff?
We’ll take you through the rules of what you can claim so that you can understand what the right approach is for you.
Christmas Parties for Staff
Entertainment in many cases is subject to FBT (Fringe Benefits Tax). The ATO considers a Christmas party to be ‘entertainment’. But there are a few situations where you will be exempt from FBT. Generally, if the Christmas party is held on a business day on the work premise and only employees attend, then it will be FBT exempt.
Another way to not be subject to FBT is to keep the cost of food and drinks consumed by the employees to less than $300 per head. However, there is no tax deduction or GST input credit claimable.
If the party is held off-site, there is still no FBT payable if the costs remain under $300 per head. Once the cost per head cost rises over $300, FBT is payable for employees and any of the employee’s family, but not for clients attending. The cost is now an allowable tax deduction.
Christmas Gifts for Staff
If you’d like to give your staff Christmas presents, the way to avoid FBT is to make sure the gift is under $300, including GST.
The gifts must not be considered entertainment, such as the entertainment categories below.
• restaurant meals
• holiday accommodation
• tickets to movies
• sporting events
Examples of non-entertainment category gifts under $300 include:
• Gift Baskets
• Store vouchers and gift cards
• Skincare or beauty products
• Sealed bottles of alcohol
If your gift meets all these criteria, it is exempt from any Fringe Benefit Tax AND you can also claim a tax deduction for it, plus the GST input tax credit if you are registered for GST.
Sole traders or partners – you can’t gift yourself a present at Christmas. These benefits are only for employees only.