Christmas happens only once a year. Hence, it’s fair for companies to express their gratitude to their employees by giving them a wonderful end of year party for their dedication and hard work for the whole year, and in the coming New Year.
Is your company’s Christmas party tax deductible?
Christmas parties are disreputable for contracting FBT, also known as Fringe Benefits Tax. The FBT is contracted on benefits provided to employees that are over $300, since it’s regarded as income paid by the company/employer.
If the cost of drinks and food consumed by employees and their families is more than $300 for each person at an in-house party, you will be required to pay the Fringe Benefits Tax on behalf of your employee’s family members.
However, if you hold the party in a different location, such as in a restaurant, it’s not necessary to pay the Fringe Benefits Tax if the expenses remain below $300 per person since it’s regarded as a minor benefit.
If f the expenses are more than $300, the Fringe Benefits Tax comes into action for your employees and their families. Note that the expenses of entertaining clients or associates are not subject to fringe benefits tax and aren’t considered income tax deductible.
The Sum and Substance
If you’re still confused about employee Christmas party tax deductible concerns, here is a recap of the essential things to keep in mind:
The Fringe Benefits Tax will be added to your holiday parties based on the day of the week the occasion is held.
The presents you give to your associates, employees, and clients must remain under $300 to be regarded as a minor benefits exemption.
The Fringe Benefits Tax will be added to your company’s payable tax based on the location where the party is held.
If you give gifts to your clients, employees, and associates at the party, you can compute the expense of the gifts and per head expense of the occasion to add up if they fall below $300 in amount.
Lastly, you cannot claim Christmas parties as an income tax deduction.
Need help with your business? Call us at Accounting Tax Solutions today on 07 5559 1200 or email us at info@accountingtaxsolutions.com.au