Let the festivies begin! Christmas Party & Gifts!
Fringe Benefit Tax (FBT) & Christmas Festivities
It is a great idea to reward your employees’ hard work throughout the year. However don’t get caught out and incur more tax than you need to at Christmas.
If giving gifts to employees, keep the cost of the gift below $300 per person. These expenses are classified as Minor Benefits and therefore not subject to Frings Benefits Tax.
If the gift is for a client, it is deductible as long as the gift is given with the expectation that the business will benefit in future. That is it will bring future income to your business.
Entertainment / Parties
To avoid paying FBT on your business Christmas party, you would need to host it at your business premises on a work day. If your work Christmas party is held away from your business, you should keep the cost of your celebrations below $300 per person (this includes all the costs of the event ie. meals, drinks, entertainment, etc) to also avoid FBT.
If your business hosts more extravagant parties and exceeds the $300 per person minor benefit limit, you will pay FBT but you can also claim a tax deduction for the cost of the event.
Unfortunately entertaining your clients at Christmas is not tax deductible. So, if you take them out to a nice restaurant, to a show, or any other form of entertainment, then you can’t claim it as a deductible business expense and you can’t claim the GST credits either.
The ATO has many rules & regulations with regards to gifts & parties, so don’t spend now and regret it later.
If you want to reward your employees or thank your clients this Christmas season, give us a call and we can help you choose the best way to achieve this whilst keeping your tax to a minimum.
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