Every year there is a lot of confusion over what a business can claim as a taxable supply around the annual Christmas Party and gift giving. The rules are pretty complicated but here is a guiding summary.
Christmas Parties:
(Excerpt from www.ato.gov.au)
“The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to 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.”
In other words….
If a Christmas Party is held on your premises on a work day…
Is not subject to Fringe Benefit Tax (FBT) and is not tax deductible if
- Only employees attend
- Current employees and spouses attend at less than $300 per person
- Employees and Clients attend at less than $300 per person
Cost of more than $300 per head then only employee associates can be claimed and FBT will arise.
If a Christmas Party is held off premises…
It is not subject to FBT and is not tax deductible unless
- For employees and their associates FBT is applied if a cost of more than $300 per person
Unfortunately for the vast majority of circumstances, Christmas parties are not claimable as a tax deduction and are not a taxable supply.
For more information please see https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/FBT-and-Christmas-parties/
Client and Employee Gifts:
If the gift is not classed as “entertainment” then gifts to employees and clients may be claimed as a tax deduction and GST credits can apply under the following circumstances.
- If the value is under $300
- Gifts over $300 may incur FBT but may still be claimed as a business expense
Gifts you can claim include:
- A bottle of whisky
- Gift Hampers
- Wine
- Perfume
- Flowers
- Pen Sets
- Gift Cards
- Vouchers
www.ato.gov.au
Which gifts cannot be claimed? …
Recreational that is entertainment includes amusement, sport and similar leisure time activities if the value is under $300.
- If these gifts are over $300 they may be claimed but will be subject to FBT
Gifts you cannot claim include;
- Sporting Club or Gym Memberships
- Holidays including tickets and accommodation
- Joy flights
- Tickets to Amusement centres
- Theatre, play or movie tickets
- Tickets to a sporting event
For more information on small business entertainment https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/FBT-and-entertainment-for-small-business/
If you would like more information on what Christmas expenses you can claim in BAS please contact us