It’s beginning to look a lot like Christmas, isn’t it?!
Have you started thinking about your staff Christmas party? Where you will have it, what you will eat, what will be the limit on drinks?. What you’ll wear for the event. Will you allow partners? Will there be gifts?
Whilst you should feel free to pop the cork on a nice red, we highly recommend you plan your staff party with the all available Fringe Benefit Tax (FBT) exemptions front of mind to ensure you and your team don't have a nasty visit from Ebenezer post celebrations.
… because, if you get your calculations incorrect, your staff Christmas party costing $8,000 could potentially give rise to you having an FBT bill of 95% of it. However, if you stay within the tax exemption rules, letting your team enjoy some Christmas cheer will not leave you with any nauseating hangover…namely an FBT bill….. so what should you do to avoid any nasties....
$300 is the magic number……
Stick to $300 per head figure or below
Christmas entertainment costs up to the value of $300 per employee are generally exempt from FBT. So, making sure you’re throwing a staff Christmas party where the cost per head is less than $300 and you should escape Fringe Benefit Tax. The best option? Have your Christmas party on your business premises or worksite on a work day, as, you then providing the food and drink will be FBT free, if it’s only employees who attend. If you invite spouses or partners (called “associates” in the legislation) the cost of your party is still FBT free if the cost per head is less than $300. Note, the cost of entertaining clients is not subject to FBT.
Like to share the love and buy Christmas gifts for your team
OK, we all like to share the love, so there is also a modification to how the rules of FBT are pertain to gifts for your staff. If, you are a generous employer, and you also give your staff a gift - the party and the gift are considered separately for FBT purposes. If each is less than $300 they are both generally FBT free.
FBT exemption means no tax deduction
It is important to remember if the Christmas party is exempt from FBT you cannot claim it as an income tax deduction, nor can you claim any GST credits arising from these party supplies.