Christmas Parties and Fringe Benefits Tax (FBT): What You Need to Know
As the festive season approaches, many of us look forward to celebrating with friends, family, and coworkers. While Christmas parties and gifts are a great way to show appreciation to your employees, they can also come with unexpected tax consequences. Here’s a guide to help you navigate the potential Fringe Benefits Tax (FBT) implications of your end-of-year celebrations.
Christmas Parties and FBT
Here are some common scenarios to consider:
1: Party Held on Business Premises
- Employees Only:
No FBT is payable for parties held exclusively for current employees. However, you cannot claim a tax deduction or GST credits for the cost. - Employees, Associates, and Clients:
- Cost Less Than $300 Per Head: No FBT is payable, but no tax deduction or GST credits can be claimed.
- Cost Exceeds $300 Per Head: The portion of the cost attributable to associates (e.g., an employee’s spouse) is subject to FBT. Amounts subject to FBT are tax-deductible, and GST credits can be claimed. Other amounts are not deductible and do not attract GST credits.
2: Party Held Away From Business Premises
- Cost Less Than $300 Per Head: No FBT is payable, but you cannot claim a tax deduction or GST credits.
- Cost Exceeds $300 Per Head: FBT is payable for each employee and their associates who attend. You can claim a tax deduction and GST credits for these amounts.
- Clients in Attendance: Client costs are not subject to FBT, but you cannot claim a tax deduction or GST credits, regardless of the per-head cost.
Special Case: Gifts at the Party
If guests receive a non-entertainment gift, such as a Christmas hamper, worth less than $300 in addition to attending the party:
- The gift is tax-deductible, and GST credits can be claimed.
- This is because non-entertainment gifts are treated separately from party expenses.
Christmas Gifts and FBT
When giving gifts to employees:
- Non-Entertainment Gifts Under $300:
Gifts like hampers, wine, gift vouchers, flowers, or similar items are exempt from FBT if valued under $300. They are also tax-deductible, and GST credits can be claimed. - Entertainment Gifts:
Tickets to concerts, sporting events, or similar activities may be subject to FBT. These are generally not tax-deductible, and GST credits cannot be claimed.
Need Help Navigating Holiday Expenses?
Managing the tax implications of Christmas parties and gifts can be tricky. Contact our team if you’re unsure where you stand or need help maximising your tax outcomes. We’re here to ensure your celebrations bring joy—not unexpected tax surprises!
