Is There Fringe Benefits Tax on Office Parties and Employee Gifts?
Business Basics, News, Tax & Accounting

Christmas Tax Rules: Christmas Parties and Staff Gifts

By

With Christmas fast approaching, it’s that time of year that the Christmas Party Tax Rule questions start trickling through, and more specifically, whether Fringe Benefits Tax apply to Christmas Parties and Gifts.

We find a lot of businesses get quite confused when it comes to what they can and can’t claim at Christmas time (it’s no wonder, as the rules are confusing and there are lots of variables too).

So, we thought we’d take a closer look at whether there are any Fringe Benefits Tax consequences to the entertainment you may be wanting to provide to your staff and associates this Christmas period.

Is Entertainment subject to FBT?

There are a few variables when it comes to determining if entertainment is subject to FBT and these include:

–       Location – in-house or held off premises

–       Cost per head – under $300 is considered a ‘minor benefit’

–       Who is invited – employees only or are family members included

For ease of reading we have created a table below showing varying circumstances based on the above. In general, if your total cost per head is under $300 the costs are likely to be exempt from FBT.  However, there is no income tax deduction available and therefore, also no GST is claimable.

In house/ Off site Cost per Head Who are the Guests FBT Applicable? Deductible?
In House Under $300 Employees No No
In House Under $300 Associates No No
In House Under $300 Clients No No
In House Over $300 Employees No No
In House Over $300 Associates Yes Yes
In House Over $300 Clients No No
Off Site Under $300 Employees No No
Off Site Under $300 Associates No No
Off Site Under $300 Clients No No
Off Site Over $300 Employees Yes Yes
Off Site Over $300 Associates Yes Yes
Off Site Over $300 Clients No No

 

Are staff gifts tax deductible?

While staff gifts are considered separately to a Christmas party, they are an associated benefit so the $300 is taken overall including the party and the gift. If the totals are under $300 and ‘infrequent’ then they will be exempt from FBT but also will not be deductible.

Our general advice to clients is to endeavour to keep any costs and associated costs of Christmas celebrations under the $300 per head threshold. This avoids FBT which can be costly not only to pay but it’s also another lodgement that most businesses would happily avoid.

Will I be taxed on Client Christmas gifts?

In most cases, Client Christmas gifts will be tax deductible to your business. However, we encourage you to read “Are Client Christmas Gifts Tax Deductible?” for a more detailed overview.

 

This is general information. We always recommend you seek advice for your individual situation from your advisor. 

 

Recent Posts

A cashflow forecasting tool for small businesses
Why Your Small Business Should Use Swell: A Cashflow Forecasting Tool

In the world of small business, keeping up with the latest data trends and maintaining a healthy cash flow can be quite demanding. This is where Lemonade Beach’s Cashflow Forecasting program, “Swell” steps in – a real time financial tracking and management tool that serves as your financial consultant and advisor.

Swell cashflow forecasting tool - levels
Three Swell Levels to Transform Your Business: Snapper, Bells, and Mavericks

In this blog post, we delve into the three levels of our Swell Cashflow Forecasting tool: Snapper, Bells, and Mavericks. Each one is designed to address the specific needs of businesses at different phases of their journey.

Tax Planning Guide
Your Guide to Tax Planning

Tax planning plays a vital role in both personal and business finance, yet it is often neglected until tax season approaches. However, understanding and implementing effective tax planning strategies can make a significant difference in your financial well-being. In this guide, we’ll explore what tax planning entails, why it’s essential, and when you can leverage it to your advantage.

Balancing Cashflow and Profitability for Business Success

Distinguishing between cashflow and profit is crucial for managing a successful business. Both serve distinct financial purposes and understanding their differences is essential. Profit, also known as net income, is the outcome of subtracting expenses from revenue, while cashflow reflects the movement of cash in and out of a business. Positive cashflow indicates more money coming in, whereas negative cashflow indicates more money going out.