FBT and Christmas Parties
It is almost that time of the year! A reminder that while staff Christmas parties can attract fringe benefits tax (FBT) there may be exemptions available depending on the venue and cost per employee.
Christmas party held on the business premises:
A Christmas party provided to current employees on your business premises or worksite on a working day is exempt from FBT regardless of the cost per employee.
The costs of associates of employees such as spouses and children attending the Christmas party on the business premises is exempt from FBT provided the cost is less than $300 per associate.
Christmas party held off the business premises:
Christmas parties held off your business premises (for example at a restaurant or function centre) will be exempt from FBT if the cost per employee or associate is less than $300.
Be aware that when expenses are exempt from FBT they are not deductible for taxation purposes & GST should not be claimed.
Christmas gifts are a great way of rewarding your employees and associates for their hard work over the year. Being aware of the FBT implications of different types of gifts can help you plan and reduce your tax liability.
There are two categories of gifts entertainment and non-entertainment:
1. Entertainment gifts – Gifts considered as entertaining or recreational include tickets to movies, theatre shows, concerts, sporting events and travel.
- If the entertainment gift is over the cost of $300 including GST per employee or associate then it will be subject to FBT.
- If the entertainment gift is less than $300 including GST per employee or associate, an FBT exemption will apply, however the gift will not be tax deductible or GST claimable.
2. Non-entertainment gifts – Gifts considered non-entertainment include hampers, bottles of alcohol, vouchers, perfume and flowers.
- If the non-entertainment gift is over the cost of $300 including GST per employee or associate then it will be subject to FBT.
- If the non-entertainment gift including GST per employee or associate, it can be claimed as a tax deduction and GST credits can be claimed.
The most tax effective option for a gift would be a non-entertainment gift costing less than $300 including GST per employee or associate.
Please contact one of the Sullivan Dewing accounting team if you require further information on FBT & Christmas.