Ho Ho Ho – it’s that time of year again…. For the work Christmas party!
We should be able to celebrate Christmas and not have to worry about tax, right? Wrong! Unfortunately our annual Christmas party falls within the realm of FBT – Fringe Benefits Tax. Luckily there are two exemptions where the Christmas party may not fall within this tax gloom (that being FBT); if you have an exempt property fringe benefit or a minor benefit.
Exempt property benefit – the cost of the Christmas party will be exempt from FBT if the benefit is “provided on a working day on your business premises and consumed by current employees”. This does not cover the cost of an employees associate.
Minor benefit – If the cost per employee per benefit is a minor benefit, that being under $300, then the cost is exempt. If the cost for an employees associate is also under the $300 threshold, then their benefit is also exempt. If you are providing your employee a gift as well as the cost of the Christmas party, then each benefit is considered separately, and if they are both under the $300 threshold, they are exempt.
Now for the catch!!!
If your Christmas party falls within any of the above two exemptions, the cost of the Christmas party (and gifts) are not income tax deductible. You can only claim a tax deduction if they are subject to FBT.
Please also note that the cost of entertaining clients for a Christmas party is not tax deductible, but also not subject to FBT.
Therefore, what should you do come Christmas party time…….. CELEBRATE!
Submitted by: Seska Tobe – Supervisor Accountant
Email Seska