Appreciating your employees at Christmas with gifts and parties and its tax implications.

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)

www.taxfirst.com.au