Wednesday, 25 November 2015

Myths about Work Christmas Parties

  •       Your secret Santa gift is always funny
  •          It is a good idea to tell your boss how you feel after a few drinks
  •          Your work Christmas party is always tax deductible

Whatever you want to call it - Christmas, the holidays, the silly season or Festivus, it is fast approaching! So before you have a few drinks and get to the “feats of strength” and the “airing of grievances” we thought we’d share a few basics on the tax treatment of Christmas parties.

Hopefully this will keep more money in your pocket for festivities with less of it taken by the Christmas Grinch/ATO.

  •          Work Christmas Parties are only tax deductible to the extent that Fringe Benefits Tax (FBT) applies.
  •           With the FBT rate currently at 49% this can add a significant additional cost to your function!

So when does FBT not apply?
The costs (e.g. food and drink) of Christmas Parties are exempt from FBT if they are provided:
  •           on a working day, and
  •           on your business premises, and
  •           consumed by current employees

If the above doesn’t apply (e.g. if you have your Christmas party off-site) the cost may still be exempt from FBT as a minor benefit provided the cost is less than $300 per employee

What if spouses attend?
The costs of spouses attending the Christmas party (whether on premises or off) is not exempt from FBT unless it is a minor benefit at a value of less than $300.

What if clients attend?
The costs of entertaining clients are not subject to FBT and are not income tax deductible.

What about staff gifts?
Gifts that are less than $300 per an employee and not entertainment (e.g. hampers) are tax deductible and no FBT will apply!

Gifts that are entertainment (e.g. movie, sport or theatre tickets) are generally not tax deductible although FBT will not apply if the cost is less than $300.

Bottom Line
The tax treatment of Christmas Parties and staff gifts can be complicated! They are often not deductible (not that there’s anything wrong with that) and sometimes FBT can apply.  If you would like to know more, or get some advice as to the best way to structure your Christmas festivities for tax please contact myself or any of the helpful team at Vivid Chartered Accountants on 02 6171 6000.

The team at Vivid wish you all a happy Christmas and we hope you enjoy your Christmas Parties – regardless of the tax treatment! 

We will be putting our feet up over the Christmas break and our office will be closed from 12pm on Thursday the 24th of December and will re-open on Monday the 4th of January.  We will also be closed on the afternoon of Friday the 18th of December for our own Christmas party.

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