FBT, Christmas Parties and Gifts

We all love a little party, sometimes more than others. However, being aware of what you can claim and what you can’t is key to not getting caught out with an FBT liability. Boring but necessary to help you spread your Christmas cheer!

Fringe benefits tax and Christmas parties

There is no separate fringe benefits tax (FBT) category for Christmas parties.

You may encounter many different circumstances when providing these events to your staff or dealing with clients’ expenditures.

Fringe benefits provided to, 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.

Implications for FBT

The following explanations may help you determine whether there are FBT implications arising from a Christmas party.

· Exempt property benefits

The costs (such as food and drink) associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. The property benefits exemption is only available for employees, not associates.

· 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. If both the Christmas party and the gift are each 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 entertainment and so is income tax deductible only to the extent that it is subject to FBT. Therefore, any party costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction, and no GST is claimable.

So if you are planning an event or giving gifts make sure you understand your obligations.