Re: Christmas Party -- Cox Business Accountants

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Date Posted: Friday, December 17, 11:55:32am
Author: Bree
Subject: Re: Christmas Party
In reply to: Jennifer 's message, "Christmas Party" on Tuesday, December 14, 12:18:31pm

In regards to the question for the Christmas Party this can become a complicated, depending on the specific circumstance involved. Here is some information to consider:

Christmas parties for employees are classified as entertainment by the Tax Office and may be subject to Fringe Benefits Tax (FBT) at a rate of 48.5%. This can mean the after tax cost of your party is more than you actually pay.

One way to avoid paying FBT is to hold your Christmas party on the employer's premises on a working day. The cost of party is then exempt from FBT and no tax deduction can be claimed. The after tax cost of your party is the amount that you actually paid. This will most often result in a lower tax cost for the Christmas party (if the employer's tax rate is less than the 48.5% FBT rate). Watch out though if the employee's family comes along as FBT is payable on the cost of food and drink provided to them and a deduction is allowed (unless the benefit to the employee's family is under $100, then FBT is avoided and no deduction is allowed).

If you hold your work Christmas party away from your business premises, FBT applies and the cost is tax deductible. If the cost is less than $100 per employee, it may be exempt from FBT and no deduction is allowed. If your employee brings his family, remember the $100 limit is the total for all the family.

This is a very confusing and complicated area. But remember, the cheapest after tax cost for your Christmas party will usually be to avoid FBT and get no deduction.

Just in case you were considering purchasing your employees gifts also here is some relevant information:

There are also certain items which are exempt from FBT which you can give to employees and get a tax deduction for. These include electronic diaries, personal organisers, briefcases, tools & tool boxes used in your business, lap top computers, and business or trade magazine subscriptions. Also, gifts such as a Christmas hamper or bottle of wine (valued at less than $100 per employee) are usually tax deductible and exempt from FBT.

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