With Christmas is just around the corner our Chief Finance Officer Greg Taylor looks at the tax issues for bringing some festive cheer to your workplace with gifts or a Christmas party.
Christmas is just around the corner and you may be thinking about the annual Christmas party or gifts for your staff. What are the tax issues in bringing some festive cheer to your workplace?
I turned to the Australian Tax Office (ATO) website for some help. According to the ATO “there is no separate Fringe Benefits Tax (FBT) category for Christmas parties and you may encounter many different circumstances when providing these events to your staff. Fringe benefits provided by you, an associate, or under an arrangement with a third party to any current employees, past and future employees and their associates (spouses and children), may attract FBT.”
Digging a little deeper I found that you do not have to pay FBT on Christmas parties if they are held on a working day on your business premises and only current employees attend. FBT applies to an associate of an employee attending that party unless the “minor benefits exemption” applies. This exemption applies if the cost of the party is under $300 per person and other conditions are met. This exemption applies to staff and associates attending a Christmas party held away from your business premises (at a restaurant).
What about Christmas gifts to staff? If the gift is less than $300 it may be given a minor benefit exemption too. If the gift is given at a work Christmas party each benefit is considered separately. If both the Christmas party and the gift are less than $300 in value, they will generally both be exempt.
You can’t claim an income tax deduction for any Christmas party costs that are exempt from FBT. There is no FBT on the costs of entertaining clients so you cannot claim an income tax deduction for those costs either.
Different rules apply for tax-exempt organisations and those who use the 50-50 split method for meal entertainment.
This is my take on the ATO’s information. You should check with your accountant or the ATO for specific advice for your business.
This article also appeared in the Newcastle Post newspaper on November 28