As the end of the year approaches, many businesses have begun to focus on planning Christmas parties for their teams.

However, it’s important to remember that there are often fringe benefit tax (FBT) implications associated with providing these benefits, which can be costly. To help you avoid any potential issues, we’ve outlined some FBT consequences you may run into.

Exempt Property Benefits

If the Christmas party occurs on a working day, on the business premises, and is attended by current employees only, the costs associated with the function are exempt from FBT. However, it’s important to note that the benefit is not available in the situation where associates such as spouses, friends or children attend the function. Please note because it is exempt from FBT, no tax deduction will apply.

Exempt Benefits

A Christmas party may be considered a minor benefit and exempt from FBT if the cost per head of the party is less than $300 per head and certain conditions are met. Additionally, the benefit provided to an associate (e.g. spouse) of your employee may also be a minor benefit and exempt if the cost for each associate is less than $300. Again, no tax deduction applies.

Christmas Gifts to Employees

A Christmas gift to an employee is a minor benefit that is exempt from FBT when the gift costs less than $300 per employee. No tax deduction will apply here also.

Tax Deductibility

Entertainment expenses are typically not tax-deductible, unless those expenses are subject to FBT. There are more complex rules depending on which FBT method an employer chooses (for example the 50/50 method), so for more information about a potential FBT liability you may incur heading into the Christmas period don’t hesitate to contact us.