The end of this unbelievable year is finally approaching. As Christmas decorations start to go up and the familiar tunes start to play at the supermarket, many businesses are planning their annual work Christmas parties. In an effort to help businesses manage their expenses, MSI Taylor has put together this post full of tax advice for work Christmas parties and a guide to what is tax deductible.
Work Christmas parties are a tradition for most businesses. They give the staff something social and relaxed to look forward to at the end of a busy quarter. However, the party planner should not make the mistake of assuming that all the costs are tax deductible. MSI Taylor has laid out the guidelines below:
Are Work Christmas Parties Tax Deductible?
Whether or not work Christmas parties are tax deductible depends on who attends the party, whether its hosted on a business day, on work premises, and so on. Some expenses are tax deductible, some are subject to Fringe Benefits Tax (FBT), and some, neither!
As professional Brisbane business accountants, MSI Taylor has outlined the different work Christmas party scenarios and whether or not they’re tax deductible, subject to FBT, or not.
Firstly, What is Fringe Benefits Tax?
Fringe Benefits Tax, or FBT, is an additional tax paid by the business for certain benefits, such as entertainment, that they provide to their staff. Oftentimes, where FBT is applicable, the business also receives a tax deduction for the cost of the benefit. In this case, the “benefits” are work Christmas parties.
When are Work Christmas Parties Exempt from Fringe Benefits Tax?
Generally, work Christmas parties are exempt from FBT if they’re hosted on a business day, on work premises, and only staff attend the party.
The party can be exempt from FBT under the minor benefit exemption if staff friends and family attend. This is as long as the cost per head is less than $300.
Work Christmas parties that are hosted off business premises are exempt from FBT under the minor benefit exemption. This is only if the cost per head (for staff and/or their friends and family) is less than $300.
Quick Guide to Tax Advice for Work Christmas Parties
Here is a table of simplified situations and whether or not FBT applies to that situation:
Tax Advice for Work Christmas Gifts for Staff
Staff always respond positively to gifts and acknowledgments, particularly around the end of the year. Whether or not gifts for staff are tax deductible depends on whether they are truly gifts, or entertainment. Examples of gifts are chocolates and snacks, gift vouchers, stationery, and hampers. Entertainment includes things like tickets for movies, concerts, theatres, and so on.
True gifts for staff are subject to FBT if the cost of the gift is more than $300. If the cost is less than $300, minor benefit exemption applies and FBT does not.
Entertainment gifts are subject to FBT and are tax deductible if the cost is more than $300. If the entertainment gift costs less than $300, minor benefit exemption applies, FBT does not apply, nor is it tax deductible.