With Christmas and New Year just around the corner, we have summarised a few useful tips about tax deductions and taxable fringe benefits to assist you in planning your year-end parties and organising gift provisions wisely. Remember that these can help in avoiding potential unnecessary costs to business. Please refer to the following information for more details.
Christmas Party
Held on the business premises on a working day and consumed by current employees
- Expenses for employees are exempt from fringe benefits tax (FBT) regardless of the party cost. No tax deduction and no GST credits can be claimed.
- Cost for employees’ associates ≥$300 (Per head count): FBT applies. Tax deductable and GST credit claimable.
- Cost for employees’ associates < $300 (Per head count): No FBT. No tax deduction and no GST credit.
Held off the business premises (e.g. at a restaurant)
- Cost for employees and their associates ≥$300 (Per head count): FBT applies. Tax deductable and GST credit claimable.
- Cost for employees and their associates < $300 (Per head count): No FBT. No tax deduction and no GST credit.
Please note: Christmas party for Clients
Clients’ expenses are not FBT payable. Regardless if the Christmas party is held on/off the business premises and regardless of the cost, FBT does not apply. However, this also means the cost of providing the entertainment to clients is not income tax deductible, and GST credits cannot be claimed.
Gift Provision
Non-entertainment gifts
These include (but are not limited to) Christmas hampers, bottles of wine or spirits, gift vouchers/cards, flowers or other similar type gifts.
- To employees and their family, gift cost < $300 (GST inclusive) per person: No FBT. Tax deductable and GST credit claimable.
- To employees and their family, gift cost ≥ $300 (GST inclusive) per person: FBT applies. Tax deductable and GST credit claimable.
- To clients and suppliers: there is no FBT regardless of the cost. Tax deduction and GST credit can be claimed.
Entertainment gifts
These are recreational-basis gifts – including but not limited to theatre/musical tickets, movie tickets, tickets to sporting events, flights and accommodation for holiday, membership to a club.
- To employees and their family, gift cost < $300 (GST inclusive) per person: No FBT. No tax deduction and no GST credit.
- To employees and their family, gift cost ≥ $300 (GST inclusive) per person: FBT applies. Tax deductable and GST credit claimable.
- To clients and suppliers: there is no FBT regardless of the cost. No tax deduction and no GST credit.
To conclude, generally the best tax outcome for businesses is to give employees non-entertainment type gifts which cost less than $300 (GST inclusive) per person.
This is because the cost of providing these gift is fully tax deductible, there will be no FBT payable, and GST credits can be claimed.
For further details, please refer to: Fringe benefits tax and Christmas parties | Australian Taxation Office (ato.gov.au)
Our Best Wishes
Christmas is fast-approaching, and it won’t be long before the turkey is roasting in the oven and presents are being opened on Christmas Day.
From everyone at MNY Group Chartered Accountants, we’d like to say thank you for your continued loyalty and faith in us. Put your feet up, have a well-deserved rest this Christmas and let every day of your holiday season be filled with joy.
From all of us here at MNY Group thank you for your continued support this year.
Thank you for being our treasured client. We hope you will continue being one of our valued clients in 2022.
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.
Fred Jiang is the director of Perth office as an ACCA-qualified professional, focusing on practical solutions for individuals and small businesses to achieve their financial goals.
