As the festive season approaches, many businesses look forward to celebrating with employees, clients, and loved ones. However, it is important to understand the potential tax consequences of such events. To help you navigate this, we have outlined the tax treatment for Christmas parties and gifts below.
Christmas Parties
Held on Business Premises
- For employees only: No Fringe Benefits Tax (FBT) applies, but the expense is not deductible for income tax, and no GST credits can be claimed.
- For employees, their associates, or clients:
- Cost per head under $300: No FBT applies, but the expense remains non-deductible, and no GST credits can be claimed.
- Cost per head over $300: FBT applies to amounts attributable to employees’ associates. These amounts are deductible for tax purposes, and GST credits can be claimed. All other costs remain non-deductible and ineligible for GST credits.
Held Away from Business Premises
- Cost per head under $300: No FBT applies, but no tax deduction or GST credits can be claimed.
- Cost per head over $300: FBT applies to expenses for employees and their associates. These costs are tax-deductible, and GST credits can be claimed.
- Clients in attendance:
- If costs exceed $300 per head, no FBT applies, but the expense is non-deductible, and GST credits cannot be claimed.
- If costs are under $300 per head and include non-entertainment gifts (e.g., hampers), the cost of the gift is deductible, and GST credits can be claimed.
Christmas Gifts
Providing non-entertainment gifts to employees as a gesture of appreciation may have the following tax outcomes:
- Gifts valued under $300 per employee: These are exempt from FBT, tax-deductible, and GST credits can be claimed. Examples include hampers, wine, gift vouchers, or flowers.
- Gifts valued at $300 or more: FBT applies, but the expense is deductible, and GST credits can be claimed.
If you are uncertain about the tax implications of your holiday celebrations or gifts, please contact us for guidance. We are here to help you manage your obligations while enjoying the festive season.
