Staff Christmas Parties & Gifts – What you need to know
So, you’re busy organising your Christmas Party, and considering what gifts to buy, if any, for your staff and clients. Have you considered that you may have to pay tax for providing Christmas Cheer!
It’s tradition to end the year with a “Work Christmas Party”! And maybe even a Christmas Gift. But is it tax deductible?
Christmas parties are considered by the ATO to be “entertainment benefits” and will incur FBT unless specifically exempt or they fall under the “minor benefits” exemption. A minor benefit is provided to an employee/client on an infrequent or irregular basis and the cost is less than $300 inclusive of GST per employee/client.
Below are some scenarios based on examples which the ATO has provided.
You decide to have a Christmas party in your office. It will be on a regular working day and only staff are invited to attend. Food and alcohol is provided. This is usually the most tax effective.
A: There is no FBT payable on the Christmas Party as it is exempt property benefit. However, as FBT is not payable, a tax deduction cannot also be claimed for this event.
Your Christmas party is held on a regular working day in your office and only current staff and their partners are invited to attend. Food and alcohol is provided.
A: If the value of the food and alcohol is less than $300 per person, no FBT is payable due to the benefit being considered both an exempt property benefit and a minor benefit for the respective parties. As FBT is not payable in this instance, a tax deduction cannot be claimed for this event.
However, if the value of the food and alcohol is $300+ per person, FBT applies only to the partner’s share which will be tax deductible.
Your Christmas party is held at a restaurant and only staff and their partners are invited to attend.
A: FBT is payable for both the staff and their partners. A tax deduction can be claimed for the cost of the Christmas party plus the associated FBT.
Christmas Gifts – for Employees
Christmas gifts fall into two categories “Non-entertainment gifts” and “Entertainment Gifts”.
Non-entertainment gifts are gifts such as hampers. gift vouchers or wine. These gifts are exempt from Fringe Benefit Tax (FBT) where the total value is less than $300 inclusive of GST and are fully tax deductible and the GST can be claimed. These gifts must not have an entertainment factor.
Entertainment gifts such as theatre or concert tickets, the movies or even short trips away have different tax implications. If they are given as gifts to employees and family members and are over the value of $300 FBT is payable and a tax deduction is allowed. Where the combined cost for employees/associates is less than $300 GST inclusive, there is no FBT, no tax deduction is allowed and no GST credit can be claimed.
If you have any questions about the tax implications of your staff Christmas Parties or Gifts – we are here to help. Call and chat to us today!
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Crown Noble Accountants & Advisors also wishes you and your family a happy and safe Christmas season.
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