‘Tis the season to be jolly! But ho-ho-hold up before you start making spirits bright and rewarding your employees or team members with gifts or parties this Christmas, as fringe benefits tax may apply when providing all the trimmings.
So, you don’t get your tinsel in a tangle for your work Christmas party, you will need to consider the following & the effects thereon:
- how much it costs, and
- where and when it is held – a party held on work premises on a normal work day is treated differently to an event outside of work, and
- who is invited – is it just employees or are partners, clients or suppliers also invited?
Similarly, where you provide Christmas gifts, you’ll need to consider the following also:
- the amount you spend, and
- the type of gift – gifts such as wine or hampers are treated differently to gifts like tickets to a movie or sporting event, and
- who you are giving the gift to – there are different rules for employees and clients/suppliers.
Some of the major items that I bring to your attention are:
- The costs (such as food and drink) associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. The property benefit exemption is only available for employees, not associates.
- The provision of a Christmas party to an employee may be a minor benefit and exempt if the cost of the party is less than $300 per employee and certain conditions are met. The benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300. The threshold of less than $300 applies to each benefit provided, not to the total value of all associated benefits.
- The provision of a gift to an employee at Christmas time may be a minor benefit that is an exempt benefit where the value of the gift is less than $300.
- The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction.
- The costs of entertaining clients are not subject to FBT and are not income tax deductible.
- The costs associated with Christmas parties held off your business premises (for example, a restaurant) will give rise to a taxable fringe benefit for employees and their associates unless the benefits are exempt minor benefits.
As you can see, there are many rules to deal with come Christmas time. Before Santa comes, we recommend that you get in touch with your senior client manager to clarify what you are planning and any taxation consequences that may arise.
Before you go, have a look at our accounting and advisory services designed to help you achieve greater financial success.
If you like this post, “Questions To Ask Before Applying For A Bank Loan,” subscribe to our newsletter and stay in touch with us by liking our main Chan & Naylor Facebook page, as well as our Linkedin, Instagram, and Twitter pages.
The Chan & Naylor Group has national offices in South West Sydney, Sydney, Pymble and Parramatta in New South Wales, Wheelers Hill, Melbourne, Moonee Ponds and Hawthorn in Victoria, Brisbane and Capalaba in Queensland, and East Perth in Western Australia that can assist you with your accounting needs. Contact us here today.