Since it is the holiday season, it’s a tradition for employers and businesses to present their staff, clients, associates, and suppliers with end of year parties and often, gifts.
While this time of the year is the most awaited season, the year-ending expenses for businesses carry an extensive range of tax treatments.
Therefore, employers must ensure that they think through the Fringe Benefits Tax (FBT) implications of the Christmas event or party.
Businesses or employers need to consider the following:
- The type and value of presents provided
- The cost spent on each employee
- Who is attending? (Clients, employees, suppliers, partners, etc.)
- Where and when is the party held?
Christmas Parties
Christmas events include what they call “entertainment benefits” and to the degree that the cost has to do with employees or their companions attending the party.
The costs may be subject to FBT (Fringe Benefits Tax) except if an exemption is implemented.
Examples of an exemption are minor benefits, which refer to the ones provided to an employee or their companion (i.e. family member) on an irregular or occasional basis.
Please note that this isn’t a reward for services, and at an expense below $300 (GST inclusive), that is “per benefits.”
In addition to this, the costs of entertainment aren’t tax-deductible except that they’re subject to Fringe Benefits Tax.
The costs acquired in providing the Christmas event aren’t widely deductible where the “exemption” (minor benefit) Fringe Benefits Tax exemption is implemented.
Provision of Gifts
Christmas gifts are generally exempted from the Fringe Benefits Tax since these are given occasionally.
Furthermore, the gifts are not mainly or entirely given to employees as a reward for the service they render.
Entertainment gifts, such as those for recreation are non-deductible. In the same way, GST cannot be claimed.
Please note that you can solely claim the GST credits and tax deduction on recreation and entertainment gifts where BFT is implemented.
Although the infrequent and minor exemption can still be implemented for recreation and entertainment gifts amounting below $300 (including GST), you can only claim the GST credits and tax deduction where Fringe Benefits Taxes are implemented for recreation and entertainment gifts.
For further questions and information regarding your FBT and Christmas party, Accounting Tax Solutions can help you today, contact us on 07 5559 1200 or email us at info@accountingtaxsolutions.com.au