As the silly season is upon us once again it is probably appropriate to provide some reminders as to the tax consequences of making gifts to and holding Christmas parties for your employees.
ON PREMISE PARTIES
If the party is held on business premises, on a normal working day:
- If only employees attend and only finger food or light meal (no alcohol) is provided, the entire cost can be tax deductible and no fringe benefits tax (FBT) applies.
- If alcohol is provided: party cost for employees will be non-deductible.
- If employees’ families or associates are also invited, party cost for their families will be FBT-exempt if cost per head is less than $300, but the cost will be non-deductible. If cost per head is $300 or more, the cost is subject to FBT, but both the party cost and FBT amount will be tax deductible.
OFF PREMISE PARTIES
If the party is held off business premises:
- If cost per head is less than $300, party cost will be FBT-exempt, but non-deductible.
- If cost per head is $300 or more, party cost will be subjected to FBT, but both party cost and GST amount can be claimed.
The gift is non-entertainment in nature (e.g. a Christmas hamper):
- Gifts can be deductible and exempted from FBT if the gift is of non-entertainment nature and value of the gift is less than $300 per employee.
The gift is entertainment in nature (e.g. movie, restaurant, sporting or music events):
- If the gift is less than $300 per employee then the expense will be exempt from FBT but no tax deduction or GST can be claimed.
- Once that amount exceeds $300 then it will be subject to FBT but a tax deduction and GST can now be claimed by the employer.
If you have any questions please do not hesitate to give us a call on (03) 9588 9000.
Have a safe and happy New Year from the team at Curve.