With the number of sleeps until Christmas reducing rapidly, many will be organising Christmas Parties and Gifts for their team and customers. To ensure you don’t end up with an uninvited visitor to Christmas celebrations we have provided some useful information in relation to the tax implications of having a celebration or giving a gift.

Many employers do not realise their Christmas Party and Christmas Gifts will usually be seen as entertainment by the ATO, which could then lead to the celebration being caught under the Fringe Benefits Tax (FBT) regime. In order to avoid this, there are certain limits you can put on the party to ensure that while employees are still enjoying themselves, you don’t end up paying for the party twice.

Christmas Party

Before planning and hosting your Christmas party there are some different treatments based on where the party is held, the amount spent and who attends. The important factors are:

For parties on a business premises on a business day

• No FBT, no tax deduction and no GST credits can be claimed in relation to current employees.
• For Associates/Partners if under $300 per head No FBT, no tax deduction and no GST credits can be claimed.
• For Associates/Partners if over $300 per head FBT will be applicable but the cost can be claimed as a tax deduction and GST credits allowed.
• For Clients No FBT, no tax deduction and no GST credits can be claimed.

For parties off a business premises

• No FBT, no tax deduction and no GST credits can be claimed in relation to current employees where cost is below $300 per head. The same applies in relation to Associates/Partners.
• For Employees and Associates/Partners where the cost is more than $300 per head FBT will be applicable but the cost can be claimed as a tax deduction and GST credits allowed.
• For Clients No FBT, no tax deduction and no GST credits can be claimed.

Christmas Gifts

Christmas gifts may also fall under the same entertainment regime as the Christmas party, depending on the enjoyment that your employees or clients will receive from the gift. The important factors are:

For a gift viewed as entertainment

• No FBT, no tax deduction and no GST for client gifts.
• In relation to Employees and their Associates/Partners No FBT, no tax deduction and no GST credits can be claimed where cost is less than $300 per head.
• For Employees and Associates/Partners where the cost is more than $300 per head FBT will be applicable but the cost can be claimed as a tax deduction and GST credits allowed.

For a gift viewed as non-entertainment

• No FBT, but the cost can claimed a tax deduction and GST credits allowed for client gifts.
• For Employees and their Associates/Partners where the cost is less than $300 there will be No FBT, but can claim as a tax deduction and GST credits allowed. If over $300 per head FBT will also apply.

Here is a list of common gifts viewed as non-entertainment:

• Beauty products
• Bottle of alcohol
• Flowers
• Board Game
• Gift vouchers
• Hampers

Best to remember the following to ensure FBT does not apply for gifts:

• Less than $300 (including GST)
• Classified as non entertainment
• A once off benefit
• Keep appropriate records to show it was a gift

All of the information above is relative solely to an employer who uses the Actual Method of calculation for FBT purposes.

We hope that this article helps to clarify any questions you may have in relation to Christmas expenses, however if you have any further queries or require additional information, please contact your trusted adviser and - most importantly - enjoy your Christmas festivities!