How to have a Tax friendly Christmas party season

Christmas is a time to unwind and celebrate. However, we’re well aware that one thing that can dampen the festive mood is unexpected tax. So let’s see some of the most responsible ways you can keep the Fringe Benefits Tax grinch at bay and enjoy some fiscally responsible merriment.

Firstly, what is Fringe Benefits Tax (FBT)?

As an employer, the main way you reward your employee is of course usually through a salary or wage. However, there are other benefits you could provide to them. This could include things like:

  • Use of a work car
  • A gym membership
  • Meals
  • Entertainment such as a Christmas party.

Just as you pay income tax on a salary or wage, you pay Fringe Benefits Tax on these fringe benefits.

Now, let’s get back to the Christmas season. Do you need to pay FBT on the entertainment and gifts to staff? Well, it depends.

If you hold your Christmas party at your place of work and only invite current employees, you don’t pay FBT on the food and drink.

If you hold your party away from the business premises and/or allow non-employees to attend, you don’t have to pay FBT if you spend less than $300 per head. Remember, that sometimes costs can blow out during an event as people buy more drinks or order more food than they initially expected to, so keep that under control to avoid ending up incurring FBT.

It’s important to remember that you can’t claim an income tax deduction or GST credits for the food, drink or transport costs you provide to employees or clients.

Now let’s consider Christmas gifts. The best way to avoid FBT is to offer a gift under $300 in value (including GST). It should also not be a gift related to entertainment. Examples of entertainment include:

  • Movie tickets
  • Sporting events
  • Musical concerts
  • Restaurant meals.

Instead of entertainment gifts, focus on hampers, gifts baskets, alcohol or other personalised gifts that you think they would enjoy.

 

 


So that’s some of the key things to consider to enjoy a tax friendly Christmas season. For more detailed information on your situation, please don’t hesitate to contact a member of the Sciacca’s team to discuss what you are planning.
 

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