Useful tips for Christmas parties

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As small businesses celebrate Christmas with staff parties, it is important to remember the Fringe Benefits Tax (FBT) implications for non-FBT exempt organisations.

Some useful rules to remember include:

  1. Entertainment is generally non-deductible for income tax purposes unless FBT is paid
  2. No GST credits can be claimed on non-deductible entertainment
  3. Morning teas, milk, biscuits and other light refreshments (not including alcohol) for employees and clients are generally not considered entertainment and are thus not subject to FBT, but are income tax deductible and GST claimable
  4. If a business is holding a social activity/function on premises such as Friday night drinks or a Christmas party, the FBT, income tax and GST implications are as follows:

For employees:

Details

Does FBT Apply?

Income Tax Deduction?

GST ITC Claim Available?

Food and Drink including Alcohol

No

No

No

Taxi Travel (i.e. to and from work)

No

No

No

For clients, contractors, suppliers:

Details

Does FBT Apply?

Income Tax Deduction?

GST ITC Claim Available?

Food and Drink including Alcohol

No

No

No

Taxi Travel (i.e. to and from work)

No

No

No

  1. If a business is holding a social activity/function off premises (i.e. a restaurant) such as a Christmas party or awards night, the FBT, income tax and GST implications are as follows:

For employees:

Details

Does FBT Apply?

Income Tax Deduction?

GST ITC Claim Available?

Food and Drink including Alcohol

Yes

Yes

Yes

Taxi Travel (i.e. to and from work)

Yes

Yes

Yes

Venue Hire, band and/or entertainers

Yes

Yes

Yes

For clients, contractors, suppliers:

Details

Does FBT Apply?

Income Tax Deduction?

GST ITC Claim Available?

Food and Drink including Alcohol

No

No

No

Taxi Travel (i.e. to and from work)

No

No

No

Venue Hire, band and/or entertainers

No

No

No

  1. A minor fringe benefit is exempt from FBT where it is both:
    1. Less than $300 in value (exc: GST) per head and
    2. is infrequently provided and/or difficult to record and value
  2. Whilst minor fringe benefits are exempt from FBT, they can’t be claimed as a income tax deduction and GST is not claimable on them;
  3. Employee gifts no matter their nature are subject to fringe benefits tax. Client gifts are not subject to FBT, however not all client gifts are income tax deductible and GST claimable.
  4. Examples of client gifts that are income tax and GST deductible include:
    1. Bottles of wine;
    2. Christmas Hampers;
    3. Perfume;
    4. Flowers;
    5. Pen Set;
  5. Examples of client gifts that aren’t income tax and GST deductible include items of a recreational nature, such as tickets to a theatre or sporting event.

If you require any assistance in understanding the taxation implications above, please contact your Hall Chadwick QLD advisor.

Hall Chadwick QLD is not a financial advisor. This article should not be taken as financial or investment advice and is general in nature. You should consider seeking independent financial and legal advice to see how the information provided relates to your unique circumstances.

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