Christmas parties and the tax department

Published on Dec 4, 2018

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It’s that time of year, the silly season has officially started. So what things do you need to consider in regard to the Australian Tax Office (ATO) when you organise your work Christmas party?

There are probably two main areas an employer needs to concern themselves with; Fringe Benefits Tax (FBT) and tax deductibility.

 

What are the costs?

The FBT liability can vary depending on a number of factors, such as whether the party is held at the workplace or off-site, whether it is only for employees, or employees and their partners, plus associates and/or clients.

Here is a typical example which will apply to many local businesses.

 

A small manufacturing company decides to have a party on its business premises on a working day before Christmas.
The company provides food, beer and wine.

The implications for the employer in this situation would be as follows.
If… Then…
Current employees only attend There are no FBT implications as it is an exempt property benefit.
Current employees and their associates attend at a cost of $180 per head

 

 

For employees – there are no FBT implications as it is an exempt property benefit, and the minor benefit exemption could also apply*

For associates – there are no FBT implications as the minor benefit exemption applies.*

 

Current employees, their associates and some clients attend at a cost of $365 per head

 

 

 

For employees – there are no FBT implications as it is an exempt property benefit

For associates – a taxable fringe benefit will arise as the value is equal to or more than $300

For clients – there is no FBT payable and no income tax deduction.

 

* Where the benefits are indicated as qualifying for the minor benefits exemption, it is on the basis that the necessary conditions have been satisfied.

Generally, you won’t pay FBT if you host the Christmas party on your business premises, or keep the cost of the party to below $300 per person.

But you should check out the ATO website for more information on the tax implications.

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Topic: Christmas, FBT, party, tax, tax deductible