We all want to celebrate the festive season with our team and acknowledge the hard work during the year.
But we don’t want to get on the ATO’s naughty list.
The rules around claiming tax deductions, Fringe Benefits Tax and GST for Christmas Parties and Gifts can be a tax minefield for any business owner.
So, let’s look at how we can claim legitimate deductions for Santa’s Helpers (who may wear suits and carry calculators)
The ATO Grinch & Christmas Parties
Before we start claiming the entire Christmas Turkey let’s have a look at what rules apply, and the interaction of Fringe Benefits Tax (FBT) and tax deductions.
Party at your workplace
|
Scenario |
FBT |
Tax Deductible |
GST Credit |
|
With only your current staff |
No FBT it is an Exempt Property Benefit |
No |
No |
|
Current staff & their partners attend at a cost of $250 per head |
For Staff – No FBT it is an Exempt Property Benefit. For partners no FBT as the cost is less than $300 pp |
No No |
No No |
|
Current Staff, partners and some clients attend at a cost of $450 per head |
For Staff – No FBT it is an Exempt Property Benefit For Partners – FBT applies as it is over $300 For Clients No FBT – only applies to Employees |
No Yes No |
No Yes No |
Party Offsite
|
Scenario |
FBT |
Tax Deductible |
GST Credit |
|
With only your current staff and partners and the cost is LESS than $300 per head |
No FBT Minor Benefit |
No |
No |
|
With only your current staff and partners and the cost is MORE than $300 per head |
For Staff and Partners – FBT applies as over $300 |
Yes |
Yes |
|
Current Staff, partners and some clients attend at a cost of $450 per head |
For Staff and Partners – FBT applies as over $300 For Clients No FBT – only applies to Employees |
Yes No |
Yes No |
Secret Santa Shenanigans
As per the ATO, Christmas gifts for staff can be divided into two categories: Entertainment and Non-entertainment
Non-entertainment Gifts
-
- Gifts under $300 (including GST) are fully tax deductible, can claim any GST credits and no FBT applies. Gifts over $300 (including GST) are tax deductible, and can claim GST and FBT is payable. Some examples for the type of gifts are as below:
-
- Company merchandise
-
- Christmas hampers
-
- Gift vouchers and gift cards
-
- Flowers, clothes, beauty products
-
- Perfumes, sport watches
-
- Bottle of wine
Entertainment Gifts
-
- Gifts under $300 (GST inclusive) are not tax deductible, no GST claimable and no
-
- FBT applies. Gifts over $300 (GST inclusive) are tax deductible, GST claimable and
-
- FBT liability applies. Some examples of entertainment benefits are as below:
-
- Fancy dinners and drinks
-
- Concert, theatre or movie tickets
-
- Sporting event tickets
-
- Flight or accommodation for holiday
-
- Club memberships
Also note that gifts for customers, suppliers and volunteers are also a deductible expense, so long as they are not excessive or overly valuable. This is not clearly defined, so we advise that you exercise conservative judgement when making a call regarding the value of the gift. Also remember, gifts that are not an Entertainment expense are treated more favourably