With the end of 2023 approaching fast and party planning in full swing, we thought it perfect timing to remind you how to get the best bang for your buck when considering the tax implications of your end of year celebrations!
Whilst Christmas parties and gift giving are a great way to show appreciation to your team for all their hard work, the ATO has reminded us that some consideration does need to be given to the deductibility and Fringe Benefit Tax implications of these expenses in your business.
what is a fringe benefit?
In Australia, a fringe benefit is a non-cash benefit that is provided to an employee or their associate by a business.
These benefits are of a private nature and not part of their wages. Want to learn more about FBT? Click here.
is a Christmas party a fringe benefit?
Christmas parties are classified as entertainment benefits; however, this doesn’t immediately make them subject to FBT and dependant on the location, attendees and cost per head, they may be exempt.
The two main exemptions that apply are:
exempt property benefits
If your Christmas party is held on work premises on a working day the costs relating to employees [including food and drink] are exempt from FBT under the exempt property benefits. This exemption does not extend to associates.
exempt minor benefits
The costs of your Christmas party may be exempt under the minor benefit exemption if the cost per head is less than $300. This exemption can apply to both employees and their associates.
what about GST and tax deductions?
If your Christmas party is not subject to FBT, you cannot claim a tax deduction for the expense and you cannot claim GST credits.
To make this a bit easier to navigate, use our easy-to-follow summary below:
FBT Payable | Deduction Available | GST Credit Available | |
Christmas party on premises, cost per head less than $300. | For Employees – No For Associates – No | For Employees – No For Associates – No | For Employees – No For Associates – No |
Christmas party on premises, cost per head more than $300. | For Employees – No For Associates – Yes | For Employees – No For Associates – Yes | For Employees – No For Associates – Yes |
Christmas party off premises, cost per head less than $300. | For Employees – No For Associates – No | For Employees – No For Associates – No | For Employees – No For Associates – No |
Christmas party off premises, cost per head more than $300. | For Employees – Yes For Associates – Yes | For Employees – Yes For Associates – Yes | For Employees – Yes For Associates – Yes |
are Christmas gifts fringe benefits?
If you give your employees a Christmas gift, it may be exempt from FBT if the notional value of the gift is less than $300 through the application of the minor benefit exemption.
A feature of this benefit is that is minor and infrequent, so gifts can only be exempt if they are provided on an irregular or infrequent basis.
If the gift is a non-entertainment gift [e.g. flowers and hampers] you will be able to claim a tax deduction and GST credit for the gift even if it is exempt from FBT.
If the gift is entertainment-based [e.g. theatre tickets or restaurant vouchers] but is exempt as a minor benefit, you will not be able to claim a GST credit or tax deduction.
don’t forget to keep your records.
Even if your party and gifts can be deemed exempt, you will still need to keep all records for assessment at FBT time.
key takeaways
In the midst of holiday festivities, it’s crucial to consider the tax implications. The ATO reminds us that while celebrating is great, understanding the rules is key.
Christmas parties and gifts can have varying tax effects, with exemptions for minor benefits and exempt property benefits.
It’s always best to keep records, and if you’re unsure, businessDEPOT is here to assist. Happy holidays!
we’re here to help
If you need assistance surrounding FBT and Christmas parties, or have any general accounting or tax enquiries, give the team at businessDEPOT a buzz on 1300BDEPOT or email oneplace@businessdepot.com.au.
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general advice disclaimer
The information provided on this website is a brief overview and does not constitute any type of advice. We endeavour to ensure that the information provided is accurate however information may become outdated as legislation, policies, regulations and other considerations constantly change. Individuals must not rely on this information to make a financial, investment or legal decision. Please consult with an appropriate professional before making any decision.