Myths
- 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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