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!