With Christmas fast approaching and end of year celebrations near, it is probably time you start thinking about what you want to do for your team. While Christmas parties are a great way to boost staff morale, team building and business growth, it is important to remember that these celebrations are often not a tax-deductible expense. Other times, they might be deductible but are also subject to Fringe Benefits Tax (FBT). Below are some points to be aware of:
- Christmas parties are considered to be entertainment by the ATO.
- Entertainment expenses are not tax deductible unless they are subject to FBT.
- GST is not claimable on any entertainment expenses unless they are subject to FBT.
- Entertainment expenses under $300 per employee are generally not tax deductible.
- Entertainment provided by an employer (or associate) that exceeds $300 per employee are generally tax deductible BUT also subject to FBT.
- FBT is very expensive – employers will get a tax deduction but will pay an additional 47% tax on these benefits.
With these in mind, you might prefer to consider holding a small party and providing staff with something else.
A tax deduction can actually be claimed on minor and infrequent gifts to employees provided they are not entertainment related. This means that you can give your employees a gift under $300 in value and, if registered, claim back the GST as well as a tax deduction.
Consider the following when deciding how to celebrate the festive season:
- Gift hampers under $300 per employee are generally tax deductible with GST credits claimable. A good choice for employers.
- Surprisingly a bottle of wine as a gift is not treated as entertainment – if under $300 employers still get a tax deduction and GST credits if registered. If provided as part of a meal it is entertainment.
- Concerts Tickets and harbor cruises are entertainment – best to avoid.
- Flowers, beauty care products and gift vouchers are not considered entertainment. Another good choice.
If you have any questions regarding the best practice for Christmas time, be sure to call our friendly team on (02) 4990 3775 or email us at enquiries@palfreyman.com.au.
