From the Institute of Chartered Accountants

It is that time of year – Christmas party planning is in full swing and employers may be considering gifts for staff and their families. The key is to ensure that your Christmas cheer does not leave you with a Fringe Benefits Tax (FBT) hangover.

Christmas Parties

The general position is that if a Christmas party is not held on your premises and the cost per employee is less than $300 per head ($150 per head if partners attend), it is classed as a minor benefit and no FBT is payable.  The function is, however, classed as ‘entertainment’ and as such no GST or tax deduction will be claimable.

If the function is held on your premises on a work day for employees and it includes a light meal but no alcohol then no FBT is payable and GST and a tax deduction can be claimed.

If however, the function is held on your premises on a work day with the employees’ families and alcohol is supplied (with the cost per employee being less than $300 per head), no FBT will be payable but no GST or tax deduction can be claimed either.

If this style of function exceeds a cost of $300 per employee then FBT is payable on the family portion and a tax deduction is claimable only for the portion for which FBT is payable.

Gifts

Gifts to employees may be provided at the same time as the Christmas party without being included in the $300 minor benefit cost allowed for the party.  So long as the gifts are less than $300 and are not classified as ‘entertainment’ (Eg: Concert tickets) then no FBT is payable and GST and a tax deduction can be claimed on these items.

With this information in mind, you can enjoy a tax effective Christmas party season!