FBT on work Christmas parties and gifts for staff
The festive season is just around the corner and if you are an employer, you may be thinking about hosting a Christmas party for staff to celebrate the year’s achievements. You might also be thinking about giving gifts to your employees.
If so, it’s a good idea to know about your tax obligations and health and safety regulations when it comes to hosting a party for your team.
End-of-year parties are a great way to celebrate and to thank staff for all their hard work during the year. If you do host a party, make sure you know your obligations. We look here at the tax implications of hosting parties and giving gifts. If you are in doubt, please contact our office so that we can advise you on what could be exempt, leaving you free to enjoy the festivities safe in the knowledge that you have things covered.
Tax obligations when hosting staff Christmas parties
From an income tax perspective you may be thinking about how to allocate the costs of a Christmas party.
The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to fringe benefits tax (FBT).
Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction. Nor can a credit be claimed for the GST component of the cost.
There is no separate FBT category for Christmas parties. Any fringe benefits provided by you as an employer, an associate, or under an arrangement with a third party to any current employees, past and future employees and their associates (spouses and children), may attract FBT.
Exempt benefits - minor benefits
The good news is that the provision of a Christmas party to an employee may be a minor benefit and exempt if the cost of the party is less than $300 per employee and certain conditions are met. The benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300.
Employers should note the ATO’s view regarding the application of the minor benefits exemption to Christmas parties and gifts provided at a party.
According to the ATO, the minor benefits threshold of less than $300 applies to each benefit provided, not to the total value of all associated benefits.
Therefore, if the cost of the party is less than $300 per employee and the cost of the staff gift is also less than $300, both would still be considered as minor benefits and exempt from FBT, even though the total of the party and gift per employee might exceed $300. In other words, each item (i.e. benefit) is considered separately.
Exempt property benefits
Other costs (such as those for food and drink) associated with Christmas parties are exempt from FBT provided they are incurred on a working day, on your business premises and any food and drink is consumed by current employees. A taxable fringe benefit will arise in respect of an associate of an employee who attends the party, if not otherwise exempt under the minor benefits exemption.
Gifts provided to employees at a staff Christmas party
The provision of a gift to an employee at Christmas may be a minor benefit that is an exempt benefit where the value of the gift is less than $300.
If a Christmas gift is provided to an employee at a staff Christmas party that is also provided by the same employer, the benefits are associated benefits, but as noted above, each benefit needs to be considered separately to determine if they are less than $300 in value.
If both the Christmas party and the gift are less than $300 in value each and the other conditions of a minor benefit are met, they will both be exempt benefits and so not subject to FBT.
No tax deduction is allowed for the cost of providing exempt benefits on which FBT is not payable.
Health and safety at Christmas
While your staff may be “off the clock”, you will probably still be responsible for their health and safety. Here are some suggestions to help your workplace celebrate safely:
- Remind staff, perhaps in an email before the event that while the party is a time to relax, it’s still a work function. You could gently remind staff to be careful if they choose to drink alcohol.
- Make sure that any alcohol is served responsibly and that there’s enough food and non-alcoholic drinks available too.
- Help your staff get home safely after the event. You could organise a bus, pre-order taxis, or arrange for designated drivers.
Speak to us
The silly season is fast approaching. If you’re planning the office Christmas party or getting gifts for your employees, your business may be subject to FBT. If you’re unsure of how to manage your FBT affairs, get in touch with us today, we have the expertise to help.
For expert advice and assistance in dealing with your Business Employment Taxes in Australia, please contact Mathews Tax Lawyers on 1800 685 829
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.