‘Tis the season to be jolly! But ho-ho-hold up before you start making spirits bright and rewarding your employees or team members with gifts or parties this Christmas, as fringe benefits tax may apply when providing all the trimmings as you can you claim Christmas gifts and parties on things such as fringe tax benefits.
So, you don’t get your tinsel in a tangle for your work Christmas party, you will need to consider the following & the effects thereon:
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- how much it costs
- where and when it is held – a party held on work premises on a normal work day is treated differently to an event outside of work
- who is invited – is it just employees or are partners, clients or suppliers also invited?
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Similarly, where you provide Christmas gifts, you’ll need to consider the following also:
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- the amount you spend
- the type of gift – gifts such as wine or hampers are treated differently to gifts like tickets to a movie or sporting event
- who you are giving the gift to – there are different rules for employees and clients/suppliers.
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Some of the major concerns that I bring to your attention are:
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- The costs (such as food and drink) associated with Christmas parties are exempt from FBT. If they are provided on a working day on your business premises and consumed by current employees. The property benefit exemption is only available for employees, not associates like partners or children.
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- The provision of a Christmas party to an employee may be a minor benefit and exempt if the cost of the party is less than $300 per employee and certain conditions are met. Possible benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300. In relation to the threshold, it has to be less than $300 applies to each benefit provided, not to the total value of all associated benefits.
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- The provision of a gift to an employee at Christmas time may be a minor benefit that is an exempt benefit where the value of the gift is less than $300.
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- The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction.
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- Things such as costs of entertaining clients are not subject to FBT and are not income tax deductible.
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- Finally, the costs associated with Christmas parties held off your business premises (for example, a restaurant) will give rise to a taxable fringe benefit for employees and their associates unless the benefits are exempt minor benefits.
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As you can see, there are many rules to deal with come Christmas time.
There are also many other things you can claim on tax, here is our comprehensive All you need to know tax guide. If you do want a personal discussion about your finances and should you consolidate your super, contact Financailly Sorted on (03) 9888 3175 or on [email protected]