It is that time of the year when you are considering holding a Christmas Party for your employees.
It is quite common for employers to provide Christmas parties and gifts at this time of the year.
The Christmas Party is considered entertainment and in some cases be subject to Fringe Benefits Tax (FBT).
Generally, the provision of food and drink associated with Christmas Parties are exempt from Fringe Benefits Tax when they are provided on a working day on your business premises and consumed by current employees. If associates attend this party and the cost for them is under $300, this is also exempt from FBT as this falls under the minor benefit exemption rules.
If the Christmas Party is at a separate location to the business then consideration must be given to the cost per head. If the cost per head is under $300 then FBT doesn’t apply and falls under the minor benefit exemption rules. If the cost per head is over $300 then FBT will apply.
Employers should also take note that when entertainment is exempt from FBT then it cannot be claimed as a tax deduction.
When providing gifts to employees they are generally subject to FBT unless the minor benefit exemption applies when the gift cost is under $300.
Gifts provided to clients are generally not subject to FBT and can be claimed as a tax deduction.
The treatment for FBT and claiming a tax deduction for costs of gifts can get tricky depending on what the gift is. Certain gifts like movie tickets can be regarded as entertainment and not tax deductible.
If you wish to discuss your situation regarding your Christmas Party, contact your trusted advisor at Green Taylor Partners.