The sun is shining, the end is near, and we begin to look forward to celebrating with friends, family and coworkers. As your advisor we wanted to make sure that you are fully aware that the end of year celebrations that you put on for your employees may hit you with unintended tax consequences. This message is to provide you with information so that you are fully informed.
Christmas Parties
These are some common scenarios relating to work Christmas parties, and their tax consequences:
- Party held on business premises
Where the party is for current employees only, there is no fringe benefits tax (FBT) to pay. However, there is also no income tax deduction or GST credits claimable.
If the party includes current employees and their associates or some of your clients, it depends on how much the cost of the party is per head.
If your party costs less than $300 per head, then there is no FBT to pay, but also no income tax deduction is allowed or GST credits claimable.
If the party costs more than $300 per head, then the amount that is attributable to your employee’s associates (such as their spouse/partner) is subject to FBT. Any amount that is subject to FBT is claimable as a tax deduction, and you can claim GST credits as well. All the other amounts are not subject to FBT, but also are not deductible for income tax and no GST credits to claim.
- Party held away from business premises
If the party costs less than $300 per head, then no FBT is payable. However, you also cannot claim a tax deduction and no GST credits are available to claim.
If the party costs more than $300 per head, then FBT is payable with respect to each employee that attends, as well as their spouse/partner. Again, if FBT is payable on an amount, then you can claim an income tax deduction as well as any GST credits.
If any clients of yours attend the party, and it costs more than $300 per head, then no FBT is payable, but also no income tax deduction or GST credits can be claimed.
However, if the party costs less than $300 per head, and at the party guests are provided a hamper (or other non-entertainment gift) worth less than $300, then the hamper is allowable as a tax deduction and GST credits can be claimed.
This is because the hamper is considered a gift which is separate from the party.
Christmas Gifts
If you provide your employees with a non-entertainment Christmas gift to thank them for their service, there is no FBT payable as long as that gift is valued at less than $300. Examples of non-entertainment gifts include a Christmas hamper, a bottle of wine or spirits, gift vouchers, flowers or other similar types of gifts.
If you are not sure where you stand with your holiday gifts and entertainment get in touch and we can answer your questions.