A client reminded me that Christmas is fast approaching. Questions followed about what they can do for their staff. Below is a summary of the Fringe Benefits Tax (FBT) consequences of Christmas parties and gifts:

CHRISTMAS PARTIES

Christmas parties are considered a meal entertainment benefit and may be subject to FBT unless an exemption applies. Such an exemption is the minor benefits exemption.

A minor benefit is that the GST-inclusive cost of the food and drinks is less than $300 per person attending.

In a simple case scenario, FBT will apply if the cost of food and drinks and potentially travel to and from the function exceeds $300 per person. If so, you can claim the GST credits and a tax deduction for the employees attending. If associates and clients attend, this component will not be subject to FBT, but no tax deduction or GST credits can be claimed.

RECREATION

It is not uncommon to have some form of recreation at parties, such as entertainment or activity such as a photo booth etc. This is regarded as a separate benefit for FBT purposes and does attract FBT. Again, the minor exemption applies if the cost is less than $300 per person.

No tax deduction and GST credits can be claimed for the expense incurred for the recreation component of the party if the minor exemption applies.

If FBT is payable on this benefit, the component for staff where FBT is incurred a tax deduction and GST credits can be claimed. This component will not be subject to FBT for associates and clients attending, but no tax deduction or GST credits can be claimed.

GIFTS

Gifts can occur in two forms:

Non-entertainment gifts such as Christmas hamper, bottle of wine, gift vouchers or similar types of gifts noted. If the gift is less than $300 per person, no FBT is payable, and a tax deduction and GST can be claimed.

Where the cost exceeds $300, FBT applies for employees but a tax deduction and GST credits can be claimed.

For clients, no FBT but a tax deduction and GST credits can be claimed.

Entertainment gifts such as concert tickets, flights, sporting event. If the gift is less than $300 per person, no FBT is payable, no tax deduction and GST can be claimed.

Where the cost exceeds $300, FBT applies for employees no tax deduction and GST credits can be claimed.

For clients, no FBT, no tax deduction and GST credits can be claimed.

The above is a basic summary of FBT and Christmas parties. Should you have any questions relating to the above, please contact Mark or the team at mark@mcaccg.com.au or 9923 2959.

“This is general advice only and not to be interpreted as individual advice specific to your situation. Contact us to discuss the best solution to your needs”.