The holiday season is upon us, which means company Christmas parties are just around the corner! As a business owner in Australia, you need to brush up on the tax rules around throwing a Christmas bash for your employees. This stuff can get confusing, so we’ve put together a straightforward guide to help you out.
The $300 Per Head FBT Rule
Let’s start with the big one – Fringe Benefits Tax, or FBT.
Here’s the deal:
- If your Christmas party costs less than $300 per person and is infrequent, it’s considered a “minor benefit” and is exempt from FBT. Hooray!
- However, if the cost exceeds $300 per head, your party becomes subject to FBT. Boo!
- This $300 minor benefit exemption applies whether your festive shindig is held on business premises or offsite. The location doesn’t matter.
- One exception – any costs related to entertaining clients are exempt from FBT.
So in summary:
- Keep costs under $300 per person = no FBT
- Costs over $300 per person = FBT rules apply
Easy enough so far?
Tax Deductibility and GST Credits
What about claiming expenses back on tax or GST credits?
- If your party is exempt from FBT (because it fell under the $300 per head limit), unfortunately you can’t claim the costs as a tax deduction or for GST credits.
- However, if the party is subject to FBT (cost per head exceeded $300), then the expenses may be tax deductible and eligible for GST credits per FBT/tax deductibility rules.
Onsite vs Offsite Parties
Where you hold your festive shindig also affects the tax treatment:
- For onsite parties held during business hours and for employees only, food and drink costs are FBT-exempt. Yay!
- For offsite parties, or those including associates, the $300 per head FBT rule applies.
- Regardless of location, no tax deductions or GST credits if the party is exempt from FBT under the minor and infrequent benefit rule.
Key Takeaways
To quickly recap:
- Keep party costs under $300 per person to avoid FBT. But this means no tax deductions or GST credits for the expenses.
- Different FBT rules apply depending on if the party is onsite or offsite.
Any costs relating to entertaining clients are exempt from FBT.
Phew, that was a lot of info!
The tax rules around Christmas parties can be complex for businesses. Our expert team at Keypoint Accountants in Varsity Lakes are here to help – give us a call on 07 5585 0600 if you need any advice. We want your company Christmas party to be stress-free and fun.
Happy holidays!
