With Christmas approaching once again, staff Christmas parties are occurring all around the Sunshine Coast. As an employer, it is important to remember the taxation rules around Fringe Benefits Tax and the ability (or not) to claim a tax deduction and GST on certain gift items.
As an employer, you may want to give gifts to your employees as a way of saying thank you. Different types of gifts have differing taxation treatment, please refer below for a summary:
- Gifting cash to employees as their Christmas present can be tax deductible, as long as it is processed through payroll as a bonus with applicable withholding tax and superannuation paid. This will not attract FBT for you as an employer, and the employees will pay income tax on the amount paid.
- Entertainment gifts such as tickets to an event are not tax deductable, and you will not be able to claim the GST on this kind of gift.
- Non entertainment gifts are tax deductible, and you will be able to claim GST on these items. Non entertainment gifts under $300 are the most favourable for businesses looking to avoid paying FBT and wanting to claim a tax deduction.
Tax Deductibility of Staff Christmas Parties
Generally, the costs related to your staff Christmas party can only be claimed as a tax deduction if the cost for each attendee is more than $300 and you pay Fringe Benefits Tax on the benefit provided. The table below looks at some Christmas party scenarios and how each will be treated for FBT purposes:
|Scenario||Does FBT apply?
Do you obtain a tax deduction?
|A Christmas party is held on a working day at the businesses premises and only employees attend||There is no FBT payable as this is an exempt benefit. There is also no tax deduction.|
|A Christmas party is held at a local restaurant and only employees attend. The cost of food and drinks is $100/head in total.||There is no FBT payable as the cost/head is less than $300 so the minor benefit exemption applies. There is no tax deduction.|
|A Christmas party is held at an expensive restaurant and the 8-course degustation menu with matching wines is ordered. Only employees attend the party. The cost of the 8-course degustation menu with matching wines is $350/head||FBT is payable in respect of the employees and their families as the minor benefits exemption will not apply, given that the benefit is more than $300/head. The cost is an allowable tax deduction.|
Merry Christmas from the team at MJJ Accounting!
If you need our assistance or have questions around FBT, gifting staff and staff Christmas parties please contact the office on 07 5451 1118.