How quickly the year has gone! It is that time of year again where you
and your colleagues will be starting to wind down for a break over the festive
season. Before you do this,
you will likely have a Christmas Party to celebrate the year.
Do not forget about your bookkeeper and accountant at this time of year!
They will be worried about one thing: The Fringe Benefits Tax (FBT) with regards to
your Christmas celebrations.
Fringe benefits provided by you, an associate, or under an arrangement
with a third party to any current employees, past and future employees and
their associates (spouses and children), may attract FBT. Let’s have a look at
the different fringe benefits received at this time of year and work out how
they affect your organisation.
Exempt benefits – minor benefits
The provision of a Christmas party to an employee may be a minor benefit
and exempt if the cost of the party is less than $300 per employee and certain
conditions are met. The benefit provided to an associate of the employee may
also be a minor benefit and exempt if the cost of the party for each associate
of an employee is less than $300.The threshold of less than $300 applies to
each benefit provided, not to the total value of all associated benefits.
Gifts provided to employees at a Christmas party
The provision of a gift to an employee at Christmas time may be a minor
benefit that is an exempt benefit where the value of the gift is less than
$300.
Where a Christmas gift is provided to an employee at a Christmas party
that is also provided by the employer, the benefits are associated benefits,
but each benefit needs to be considered separately to determine if they are
less than $300 in value. If both the Christmas party and the gift are less than
$300 in value and the other conditions of a minor benefit are met, they will
both be exempt benefits.
Tax deductibility of a Christmas party
The cost of providing a Christmas party is income tax deductible only to
the extent that it is subject to FBT. Therefore, any costs that are exempt from
FBT (that is, exempt minor benefits and exempt property benefits) cannot be
claimed as an income tax deduction.
The costs of entertaining clients are not subject to FBT and are not
income tax deductible.
Christmas party held on the business premises
A Christmas party provided to current employees on your business
premises or worksite on a working day may be an exempt benefit. The cost of
associates attending the Christmas party is not exempt, unless it is a minor
benefit.
Want to learn more? Reach out to the team at Marin Accountants today. We hope you have a wonderful festive season!
