With the end of the year approaching, it’s essential for employers to understand the tax consequences of giving gifts and hosting Christmas parties for employees.
While it’s important to take the time to celebrate the season and recognise employees for their contributions, there may also be a potential tax impact of such celebrations.
How are you planning to party?
When planning a Christmas party, employers should review the cost as well as where and when it is held. A party held on work premises on a regular work day is treated differently to an event outside of work.
| IF | THEN |
| A Christmas party is helf on work premises on a working day for employees | There is no FBT implication as it is an exempt property benefit.
There is no tax deduction and no GST claimable. |
| A Christmas Party is held outside of work premises for the employees | Where the cost is less than $300 including GST per head, the party may be exempt from FBT under the minor and infrequent rule.
There is no tax deduction and no GST claimable. For parties where the cost is over $300 including GST per head, it is subject to FBT. However, the cost of the party is tax deducible and GST is claimable. |
What gifts should you give your staff and others?
Christmas presents may also attract FBT. Employers should consider the value of the gift; the type of gift (entertainment or non-entertainment) and who the gift is given to.
| TYPE OF GIFT | GIFTS TO EMPLOYEES | GIFTS TO NON-EMPLOYEES |
| Non-entertainment gifts
E.g. gift hamper, wine, perfume, gift vouchers |
Subject to FBT (unless the minor benefit exemption applies) and tax deductible.
To be exempt minor benefit the total cost of a gift must be less than $300 including GST. |
No FBT applies.
Income tax deduction is allowed. GST input tax credits can generally be claimed. |
| Entertainment gifts
E.g.movie tickets, sporting event tickets, hotel accommodation |
Subject to FBT unless the minor benefit exemption applies, income tax deductible.
The gift cost must be less than $300 including GST. If the gift is FBT exempt, no income tax deduction and no GST credit can be claimed. |
Not subject to FBT.
No income tax deduction can be claimed. GST input tax credits cannot be claimed. |
Where a gift is provided at a Christmas party, both items are considered separate benefits and may both be exempt as minor benefits.
Unsure of your FBT obligations or want more insight?
Speak to your advisor or contact Angela Stavropoulos or Kristy Baxter on 07 3023 1300 to ensure any adverse tax effects are mitigated when providing benefits to your employees.
By planning ahead and considering the points above, you and your staff can enjoy the holiday season, while avoiding an unwanted surprise in the New Year.