With the festive season not too far away, it is important to know the Fringe Benefit Tax (FBT) rules around entertainment and end of year parties. You will find below our tips for keeping your Christmas party tax free.
Know your limits
The key to keeping your Christmas party and gifts remaining tax free is to keep them under $300 per person. This is the FBT minor benefit threshold. Just remember that while this is free from FBT you can’t claim a tax deduction, and nor can you claim the GST.
Gifts to employees
Non-entertainment gifts like vouchers, bottles of wine or food hampers are tax deductible and you can claim the GST. However, remember to keep the value under $300 otherwise they will be subject to FBT. If issuing gift cards, don’t be tempted to provide $300 cards, as this is not less than $300 and will not be eligible for the minor benefit exemption.
Entertainment gifts like tickets to a show or sporting event are not tax deductible, and you cannot claim the GST. Again, you need to keep the value under $300 otherwise they will be subject to FBT (and this is the confusing bit, if they are subject to FBT, then you do get a tax deduction).
Location, location, location
If you hold the party at your workplace on a working day and only current employees attend, then the event will be FBT free regardless of the amount you spend per person. However, you can’t claim a tax deduction, and nor can you claim the GST.
If you intend to hold your party away from your workplace, like at a restaurant or the races, it is important to keep the cost below $300 per person, among other conditions, to retain the minor benefit status and be exempt from FBT. Once again you can’t claim a tax deduction nor the GST credit.
The Christmas bonus
If you’d rather pay cash bonuses to give your employees this festive season, this is treated the same way as salary and wages. You will need to withhold PAYGW and pay superannuation.
If you are unsure about the FBT or Income tax implications for your Christmas function or gifts please contact the MJJ team.