The humble office Christmas party….
A time and place to be merry, eat, drink and possibly engage in regretful behavior and/or make a d*@k of yourself. (Have I said too much?)
After recovering from the ensuing hangover and glancing at the bill for said frivolousness you might ask yourself, “Did my staff really drink that much? What a bunch of Freeloaders!” You might also ask, and this is less common, “What are the tax implications of spending all this money?” The answer is Fringe Benefits Tax.
Fringe Benefits tax is a tax that an employer might pay where they provide an employee with a benefit that isn’t salary or wages. This includes entertainment; entertainment includes Christmas parties. Fortunately, if you’re a small business there’s some precautions you can take to reduce and possibly avoid FBT altogether:
– Keep the cost of food and drink under $300 per head: An exemption exists where ‘minor benefits’ are disregarded for Fringe benefits Tax. Also…
This exemption can also apply to spouses and partners of employees (if they’re invited). They get their own $300 threshold.
Any Christmas gifts or cash bonus’ can still be paid to employees around this time. They also get their own $300 threshold.
– Hold the Christmas party in-house: Food and drink consumed by an employee on work premises on a work day are not subject to Fringe Benefits Tax. Be careful of spouses and partners though, as this exemption only applies to employees.
– Keep tabs on who you’re entertaining: If your Christmas gathering includes people other than employees and their associates, make a note. Clients, suppliers and industry contacts are not employees and FBT won’t apply to them in any case.
Those are the Fringe Benefits Tax tips, but getting back to my original question… “Are Christmas party expenses deductable… ya know.. on my regular income tax return?”
No. Not if you manage to avoid Fringe Benefits Tax altogether.
In fact, the only time a business may be able to claim a tax deduction or claim back GST on entertainment is where Fringe Benefits Tax has been paid on that entertainment. In other words, you have to pay some tax, then the ATO will let you claim a deduction. Even then, it might only be a partial claim.
This is just the tip of the ice-berg when it comes to Entertainment Fringe Benefits. Suitable for small business’ who hold small Christmas parties.
If you have more complex Fringe Benefit matters, give Optima a call 0n 6267 2200
Antony Monaldi – Snr Accountant
