Christmas Parties Can Be Taxing

It's beginning to look a lot like Christmas, and with the arrival of the silly Season comes' Christmas parties. Let’s not forget amongst all the fun, that there is always a tax implication, and this time it’s Fringe Benefits Tax. FBT is a complex tax filled with so many ‘ifs’ and ‘buts’ it is very difficult to navigate.'  Here are some questions we’ve received lately that may help you out:

Q: I am planning to have a large Christmas party for all the staff this year, but I am concerned about FBT – what are some things I should be aware of? And do gifts count as Fringe Benefits?

If you are planning your party this year, first think about where you would like it to be held – parties and functions held on premises on working days, for employees, can be considered excluded benefits, and as such not liable for FBT. So first ask whether there is room for everyone on site. If you want to go offsite and/or invite employees’ partners, then you should be aware of the minor benefits exemption*. So long as the total expenditure per person – including partners of employees – is less than $300, no FBT is payable. The trick here is to keep strong records of your event. Make sure all staff are checked off on arrival and their partners/families too – it makes FBT time (year end 31 March) much easier!

Gifts to employees can be caught by FBT. But once again, the minor benefit exemption can apply and so long as the gift is less than $300 per person, it is most likely exempt from FBT. When figuring out the total spend per person, note that the party is separate from the gift – so you can spend up to $300 per person on the party, and $300 per person on gifts – which should work out to be one great Christmas party.
 
Q: Is the Christmas party tax deductible at all?

The shortcut guide is if the expense is classed as entertainment, only if you paid FBT on it, may it be deductible. Note that where no FBT is paid, as you satisfied the minor benefits exemption explained above for example, then costs would not be considered deductible. The exception is non-entertainment gifts which can still be tax deductible.

As mentioned, FBT can be painful to negotiate – there are no hard and fast rules. The best advice is to keep good records of all your expenditure around this time of year and if in doubt consult your accountant.

*Note that if you elect to utilise the 50/50 split method for meal-entertainment you can not take advantage of the minor benefits exemption.

This advice is general in nature and readers should seek specialist advice before making financial decisions. WHK Pty Ltd ABN 84 006 466 351.

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