Is your Christmas party deductible? The cost of providing a Christmas party is only tax deductible to the extent that it is subject to FBT. Any amounts that are exempt from FBT, such as exempt minor benefits and exempt property benefits, cannot be claimed as an income tax deduction.
Exempt property benefits
Costs associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and 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.
Exempt minor benefits
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.
A company decides to hold its Christmas function at a restaurant on a working day before Christmas and provides meals, drinks and entertainment. The implications for the employer in this situation would be as follows.
|current employees only attend at a cost of $195 per head||there are no FBT implications as the minor benefits exemption applies.*|
|current employees and their associates attend at a cost of $180 per head||there are no FBT implications as the minor benefits exemption applies.*|
|current employees, their associates and clients attend at a cost of $365 per head||for employees - a taxable fringe benefit will arise|
|for associates - a taxable fringe benefit will arise, and||for clients - there is no FBT payable and the cost of providing the entertainment is not income tax deductible.|
If you would like more information on the deductibility of your Christmas party or any other expenses please contact our skilled staff on (07) 5538 0999.