what can you claim this christmas?
We can’t do much about the “no dancing” this year, but we can help you negotiate the rules around Christmas parties, gifts and deductibility.
Each Christmas business owners big and small ask us what they can deduct from work Christmas parties and gifts. Sound like a question you have? We thought so, keep reading!
So, here’s what you need to know.
What is FBT, and what does it have to do with Christmas?
FBT stands for Fringe Benefits Tax and it’s important to understand that there is no independent fringe benefits tax (FBT) category for Christmas parties. However, certain aspects of your Christmas party may be exempt from FBT if they can pass as a minor and infrequent benefit.
A minor benefit is defined by the ATO as a benefit that is ‘less than $300 in notional taxable value’ and ‘unreasonable to treat as a fringe benefit’. Under this definition, you may be eligible for relief from FBT as long as the cost per head does not exceed $300. To calculate this simply divide the total cost of the party by the number of attendees.
“Always remember that if an item is exempt from FBT, then it is not tax deductible, nor can you claim the GST credits.”
Can I claim my Christmas gifts?
The $300 limit also applies to Christmas gifts you provide to your staff however the deductibility and GST treatment is based on whether the gift is “entertainment” or “non-entertainment”. To get the best outcome we recommend providing “non-entertainment” gifts (see below) costing less than $300 and you will be able to claim a tax deduction plus claim the GST.
Examples of non-entertainment gifts:
- Skincare and beauty products
- Gift vouchers
Did you know?
Did you know if you serve alcohol at your Christmas party – the entire event’s expenses become non-deductible?
The ins and outs of deductibility
For the entire cost of a Christmas party to be a deductible expense, the Christmas party must meet the following criteria:
Held on your business premises
Held on a working day
Held for current employees, volunteers, customers, and suppliers only
Only finger food or a light meal provided
No employee associates (e.g. spouses, children, etc.) present
If a Christmas party includes any of the following elements, the entire cost is non-deductible:
- Alcohol is served
- Employee associates (e.g. spouses, children, etc.) attending
- Held at a location other than your business premises
The Christmas deduction wrap-up
In summary, you can avoid FBT during the festive season by keeping the per head costs below $300, but the expenditure will be non-deductible entertainment.
Some may argue that ensuring your Christmas party is tax deductible by complying with the above criteria is not in the best interests of staff moral and certainly not inductive to building strong relationships and fostering a positive work culture within your business.
Still have questions?
Perhaps you’d like to know more about this blog’s topic? Or perhaps we impressed you so much with our know-how on this topic, that you’d like to ask us about another accounting related topic?
Either way, feel free to drop us a line – we really are as friendly as we seem to be 🙂