It is Christmas time and we come bearing gifts… No, it is not gold, frankincense, and myrrh.
It’s tax information on what you can and cannot claim as an employer.
Many employers want to look after employees by treating them to gifts and functions. We believe there is nothing wrong with getting a little bit of a tax benefit at the same time.
However, the tax laws surrounding staff benefits are quite complex.
Are Christmas parties tax deductible or subject to FBT?
In some cases, yes.
In some cases, no.
Christmas parties are usually considered to be “entertainment benefits”. Therefore, the expenses may be subject to fringe benefits tax (FBT) unless an exemption, such as the “minor benefits” exemption, applies. To be considered a minor benefit, the value of the benefit needs to be less than $300 (inclusive of GST).
But there are many additional regulations in place which could stop your benefit from being FBT-free or tax deductible. For example, some entertainment expenses are not tax deductible unless they are subject to FBT.
Understanding FBT can be a mine field to navigate.
Are Christmas gifts tax deductible or subject to FBT?
Christmas gifts are no less confusing than parties.
In most cases, gifts are subject to FBT unless they are considered a minor benefit.
Generally, it is considered that the best tax outcome for businesses is to give employees non-entertainment-type gifts that cost less than $300 (inclusive of GST) per employee. This can potentially allow it to be tax deductible.
Although, there are many terms and conditions to the rule. Identifying what is and is not an “entertainment” gift is challenging enough.
Rather than weeding through the nitty gritty tax laws, we recommend that you leave your complex deductions to an accounting professional. Alternatively, you can get details from the ATO website.
If you need any more information on Fringe Benefits Tax or tax-time claims, you can contact one of our small business tax champions. Your first initial consultation with us is 100% free of charge. Enquire today.