With the end of year approaching, businesses are turning their focus to planning Christmas Parties for their team. There are often fringe benefits tax (FBT) implications associated with providing these benefits, which can be costly. Below we have outlined some FBT consequences you may run into.

Exempt property benefits

The costs associated with Christmas parties are exempt from FBT if it occurs on a working day, on the business premises, and consumed by current employees. The property benefit is not available for associates (spouses, friends, children).

Exempt benefits – minor benefits

A Christmas party may be considered a minor benefit and exempt if the cost per head of the party is less than $300 and certain conditions are met. The benefit provided to an associate of your employee may also be a minor benefit and exempt if the cost for each associate is less than $300.

Christmas gifts to employees

A Christmas gift to an employee is a minor benefit that is an exempt benefit when the gift costs less than $300.

Tax deductibility

Entertainment expenses are not tax deductible, unless those expenses are subject to FBT. A party by definition is entertainment, so you cannot claim a tax deduction for the cost of providing a Christmas party if it is FBT exempt.

A Christmas gift is not an entertainment expense if it is something that the employee takes home to use. FBT-exempt Christmas gifts should still be tax-deductible.

For more information about potential FBT liability you may incur heading into the Christmas period, please get in touch.