Your guide to FBT on staff Christmas celebrations
Have you had your staff Christmas party already? Or are you looking forward to knocking off early for a festive end of lunch office party on Christmas Eve?
After the celebrations are over and the receipts come in, there are some key tax rules to consider for your financial reporting. Christmas parties and gifts are considered a benefit to employees outside of their salary. As a result, there are Fringe Benefits Tax (FBT) implications that can arise where certain factors or thresholds are met.
There are two key things to consider:
- The first is called the property benefit exemption. This is where you have provided food or drink to your employees on your work premises during a working day. This exemption applies if your staff Christmas function was (is) held on your business premises on a normal workday (e.g. Friday), and means the celebration is without any tax liabilities.
- The second is the minor benefits exemption. This exemption allows employers to provide their employees with a benefit up to the value of $300 (note that this includes GST). So if you have held/are holding your staff Christmas function outside of the work premises this exemption will apply. A handy tip to note is that this threshold applies to each individual benefit separately. Therefore, you are able to provide your employee with a Christmas party up to the value of $299.99 per person; and a gift costing less than $300.
We appreciate that tax is rarely the main priority for planning Christmas parties, but it is important that the correct tax treatment is applied. There is a common misconception that costs associated with employee Christmas parties are an eligible tax deduction. However, this is not the case. Unless the party is subject to FBT, because it’s considered “entertainment” these expenses are not tax deductible and you can’t claim back the GST.
Please be aware that if your business/organisation is subject to FBT, the deductibility of your expenses is also subject to other rules.
If you have any questions or concerns about your FBT liability, whether relating to Christmas celebrations or any other activities, please contact your WLF advisor.