Claim back Christmas this year

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.

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
  • Flowers
  • Wine
  • Perfumes
  • Gift vouchers
  • Hampers.

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

  • No alcohol

  • 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.

Lisa Hooton
Lisa Hooton is the founding director of Nurture Accounting in North Lakes QLD. She has 25 years experience in Public Practice with a passion for Small Business Compliance. Lisa is dedicated to Nurture’s clients and team, always learning, fun and spirited individual. Lisa is a guru in time and workflow managment. She is also an advocate for the development and implementation of automation and cloud systems in small business. Lisa is a supporter of women in small business and an active volunteer in the local community. Lisa lives with her husband of 24 years and 3 amazing daughters in Murrumba Downs QLD. She spends her downtime writing blogs and courses on business administration and management, is an avid gamer and loves a good road trip. BBus (hons). BArts (hons). CPA. MIPA. Registered Tax Agent. Registered ASIC Agent. Xero Certified Advisor and Xero Gold Partner.

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