It is Christmas time and a number of our clients have asked about the tax implications for Christmas gifts and parties. Here is a quick guide based on information provided by the Tax Office.

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Christmas gifts

Christmas gifts provided to employees

Gifts (bottle of alcohol, Christmas hampers) that cost less than $300 per employee, are considered to be minor benefits and are exempt from the fringe benefit tax (FBT).  They are not deductible for income tax purposes. Employers cannot claim the GST on such gifts.

 

Other gifts (movie tickets, tickets to sporting or theatrical events, sightseeing tours, holidays, weekends away) are entertainment benefits and may be subject to FBT.

 

Christmas gifts provided to customers/clients

Christmas gifts or gifts generally provided to business customers or clients with a view to generate possible assessable income in the future are deductible for income tax purposes.  There are no FBT implications for such gifts.

 

 

Christmas parties

Christmas parties held on your business premises

A Christmas party provided to current employees and their associates on your business premises on a working day may be a minor benefit if the cost is less than $300 each.  There are no FBT implications and the cost is not deductible to the employer for income tax purposes.  The employer also cannot claim GST on the cost incurred.

 

If the cost is more than $300 per employee and their associates, then there are no FBT implications for employees.  The associates cost will be subject to FBT.

 

The cost of entertaining clients is not subject to FBT.  It is also not deductible for income tax purposes

 

Christmas parties held off business premises

A Christmas party provided to current employees and their associates off your business premises (eg. at a restaurant) on a working day may be a minor benefit if the cost is less than $300 each.   There are no fringe benefit tax implications and the cost is not deductible to the employer for income tax purposes.  The employer also cannot claim GST on the cost incurred.

 

If the cost is more than $300 per employee and their associates, then it will be subject to FBT.

 

The cost of entertaining clients is not subject to FBT.  It is also not deductible for income tax purposes.

  

We would be happy to help if you would like more information.

 

We wish you and your loved ones a Merry Christmas and a happy and safe New Year.

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This article is generic in nature for the purpose of education. Bartly Pty Ltd (Bartly) is not responsible for any loss or damage incurred in any way shape or form and will not be liable to anyone whatsoever for the use of information contained in this article. You should not rely solely on this article to make any investment or tax planning decisions. We recommend you seek independent professional advice that relates specifically to your situation.