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Fringe Benefits Tax and Christmas Celebrations
The location of the Christmas party (i.e. on-site or off-site) has a significant bearing on the tax implications. These costs are regarded as meal entertainment benefits for FBT purposes.
Christmas party on-site
Where an event is held on the business premises during a working day, meal entertainment benefits provided to employees are exempt from FBT, regardless of their cost. If any associates of employees are attending, their costs are subject to FBT unless the minor benefits exemption applies. This means business seeking to avoid FBT will need to keep the cost of the event below $300 per person (including GST).
Meal entertainment costs for clients are not subject to FBT; but nor are income tax deductions or GST input tax credits available.
Christmas party off-site
Where a business chooses to hold its Christmas party off-site, the exempt property benefit for employees is no longer available. As a result, the employer may spend less than $300 per person (including GST) without paying FBT under the minor benefits exemption. This applies to both employees and their associates attending the event, but the $300 limit applies to the employee and their associate separately.
As noted above, client meal entertainment costs are not subject to FBT and are not income tax deductible; but nor can you claim GST input tax credits for these expenses.
Gifts provided to employees and/or their associates
Where a Christmas gift is provided to an employee and/or their associate, they are subject to FBT unless the minor benefits exemption applies. For example, a hamper or gift costing less than $300 given to each employee at a Christmas function — that meets the conditions of the minor benefits exemption — is not subject to FBT and is tax deductible and GST-creditable.
Gifts provided to clients or customers
An income tax deduction is available for gifts provided to a client or customer if the gift can be characterised as being made for the purpose of producing future assessable income. Such gifts are not subject to FBT. However, gifts that constitutes entertainment, such as movie tickets or sport tickets, will not be subject to FBT, but nor will income tax deductions or GST input tax credits be available.