Christmas and FBT explained.

With Christmas just around the corner, it is a good time to consider the fringe benefit tax (“FBT”) implications that can arise from the associated celebrations. Whilst Covid-19 has put a real spin on events this year, it is no surprise that many people are busting for a good excuse to have a party.

Fringe benefits provided by you (your associate, or under an arrangement with a third party) to any employees (current, past or future) and their associates (spouses and children), may attract FBT.

Christmas Party

There is no separate FBT category for Christmas parties.

Basically, a tax deduction for a party is only available if the party is subject to FBT. Hence, if it is an exempt minor benefit or an exempt property benefit, it is unlikely to be tax-deductible and you would not be able to claim GST input tax credits.

An example of an exempt property benefit may include a Christmas party on the business premises on a working day where food, beer and wine are provided. This exemption would relate to costs for employees only.

An example of a minor benefit exemption would relate to a Christmas party held off premises where meals, drink and entertainment were provided at a cost of less than $300/employee or associate.

Christmas Gift

Generally, providing non-entertainment type gifts (e.g. hamper, wine, gift vouchers) at a cost of less than $300 per employee is the best outcome for the employer.  In most circumstances, it is tax deductible and the GST input tax credits can be claimed.

Providing entertainment type gifts (e.g. movie tickets, club memberships, accommodation/travel for holidays) to employees would be subject to FBT unless the minor benefit exemption applies (which makes it non-deductible and unable to claim input tax credits).

It is also best to provide non-entertainment type benefits to clients, suppliers and contractors.  Generally, this is tax deductible and the input tax credits can be claimed. Providing entertainment type benefits to clients, suppliers and contractors is non-deductible and you are unable to claim input tax credits.

For more information, please do not hesitate to contact us to discuss.

Reference: https://www.ato.gov.au/general/fringe-benefits-tax-(fbt)/in-detail/fbt-and-christmas-parties/