Planning for Success

Having a Work Christmas Party? You need to know this!

Taxes may be the furthest thing from your mind while preparing for work Christmas parties, but it’s essential to understand some of the tax implications of “entertainment benefits” in the workplace.

What you need to know about Christmas parties and Fringe Benefit Tax (FBT)

Workplace Christmas parties are considered “entertainment benefits”, which means party-related expenses may be taxed under FBT unless there is an exemption such as it being classified as a minor exemption. Minor exemptions are defined as infrequent or irregular benefits that are provided to an employee or their spouse. The benefits can’t be in exchange for value, and they have to be worth less than $300 including GST.

There are many different scenarios where the FBT is avoidable, and others where it is not. The tax may be applied in various ways due to certain circumstances, like a gathering off-site or on-site, inviting family members of employees, and clients. Confused?? Yes you are not the only one! It is a tricky part of Tax legislation so to make it a little easier here are a couple of tables which may help.

CHRISTMAS PARY HELD ON PREMISES ON A WORKING DAY

ScenarioTax Implications
Current Employees only Attend
(NO Cost per head limit)
NO FBT
NO Tax Deduction
NO GST credit claim
Current Employees & their associates Attend
(Cost per head is LESS than $300 inc GST)
NO FBT
NO Tax Deduction
NO GST credit claim
Current Employees, their associates & clients Attend
(Cost per head is equal or MORE than $300 inc GST)
For Employee expense:
NO FBT
NO Tax Deduction
NO GST credit claim
For Associate expense:
FBT Applies!
Tax Deduction
GST credit claim
For Client expense:
NO FBT
NO Tax Deduction
NO GST credit claim
CHRISTMAS PARY HELD ON PREMISES ON A WORKING DAY

CHRISTMAS PARY HELD OFF BUSINESS PREMISES

ScenarioTax Implications
Current Employees only Attend
(Cost per head is LESS than $300 inc GST)
NO FBT
NO Tax Deduction
NO GST credit claim
Current Employees & their associates Attend
(Cost per head is LESS than $300 inc GST)
NO FBT
NO Tax Deduction
NO GST credit claim
Current Employees, their associates & clients Attend
(Cost per head is equal or MORE than $300 inc GST)
For Employees &
Associate expense:
FBT Applies!
Tax Deduction
GST credit claim
For Client expense:
NO FBT
NO Tax Deduction
NO GST credit claim
CHRISTMAS PARY HELD OFF BUSINESS PREMISES

Are you giving your employees a Christmas Gift? Then you need to keep reading!

For the best tax result, give your employees a ‘non-entertainment’ gift that costs less than $300 inc GST per person. A ‘non-entertainment’ gift includes:

  • Christmas Hamper
  • Bottle of wine or spirits
  • Gift Vouchers
  • Flowers

Non-Entertainment gifts are: FULLY tax-deductible, GST credit claimable & NO FBT payable.

AVOID giving your employees ‘Entertainment’ gifts! These include:

  • Theatre or musical tickets
  • Movie Tickets
  • Tickets to Sporting events
  • Flights & Accommodation for holidays
  • Membership to a club

Entertainment gifts UNDER $300 have NO FBT payable BUT there is NO Tax Deducation and NO GST credits claim

Do you need help with your business tax?

Don’t let tax concerns affect your holiday season – let Vibrant Business alleviate your financial concerns so that you can focus on running your business.

Vibrant Business will help take care of all of your business financial needs. From tax and accounting to bookkeeping, coaching, and mentoring, we can help you plan and structure your business to achieve your milestones.

For more information on these services, please contact us or book a time to chat here.

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