There is no better time for a business to thank the staff
for their services and show appreciation for their work than Christmas. Holding
Christmas parties and providing gifts has its own tax implications. Below is a
summary:
NON-ENTERTAINMENT
GIFTS
·
Non Entertainment gifts are gifts such as gift
vouchers, hampers, flowers, alcohol, etc. Where the total value of
non-entertainment gift is less than $300 (GST Inclusive), they will be exempt
from Fringe Benefit Tax (FBT) and the business will be able to claim a tax
deduction and GST credits.
ENTERTAINMENT GIFTS
·
Entertainment Gifts are gifts such as tickets to
movies, theatre, sporting event, etc. Where the total value of entertainment
gift is less than $300 (GST Inclusive), they will be exempt from Fringe Benefit
Tax (FBT) but the business will NOT be able to claim a tax deduction or GST
Credits.
CHRISTMAS PARTY – OFF
SITE
·
When the cost for the employee and their
associate is each less than $300 (GST Inclusive), the expense would be exempt
from FBT but the business will not be able to claim a tax deduction and GST
credits.
CHRISTMAS PARTY – ON
SITE
·
When the Christmas party is held on a working
day at the business premises with only employees and clients attending and only
finger food or light meal and no alcohol is provided, the expense would be
exempt from FBT and the business will be able to claim a tax deduction for the
entire cost. GST Credits can be claimed for the entire cost too.
·
When the Christmas party is held on a working
day at the business premises with only employees and alcohol is provided, the
expenses are exempt from FBT for employees with no dollar value limit but no
tax deduction or GST credit can be claimed. Where the employees’ associates
attend and the cost attributable to each associate is more than $300 (GST
Inclusive), there is FBT on the associate’s portion, and a tax deduction and
GST credits can be claimed on the associate’s portion.
BY SURESH RAJANI
Suresh Rajani is the Tax and Business Adviser at TAX FIRST (An accounting and business advisory firm)
