Christmas Parties and Gifts
When organising your Christmas party be sure you plan ahead and refresh your knowledge about the Fringe Benefits Tax (FBT), GST and income tax implications associated with the holiday season, in particular the Christmas functions and gifts that businesses may provide to staff and clients at this time of the year.
Taxation treatment of gifts is different depending on whether they are classed as entertainment or non-entertainment.
Gifts which are considered entertainment generally include:
- Restaurant meals;
- Tickets to attend a theatre, live play, sporting event, movie, etc;
- Holiday airline ticket;
- Amusement centre pass.
Entertainment gifts to employees and their families
Where the value of the gift is less than $300 per person and it is a one-off gift, it is exempt from FBT as a minor benefit. In this instance the expenditure is not tax deductible and GST input tax credits cannot be claimed.
Gifts to employees and their families that are not exempt minor benefits (e.g. gifts valued at $300 or higher per person) are subject to FBT however such gifts are tax deductible to the business and GST input tax credits are available.
Entertainment gifts to clients
These do not give rise to any FBT liability and are not tax deductible to the business. No GST input tax credits can be claimed in respect of such gifts made to clients.
Gifts (non-entertainment)Examples of gifts which are considered non-entertainment generally include:
- A bottle of whiskey, wine, etc;
- Gift cards;
Non-entertainment gifts to employees and their families
Where the value of the gift is less than $300 per person (e.g. $250 for employee and $250 for spouse) and it is a one-off gift, it will be exempt from FBT as a minor benefit. In this instance the gifts are tax deductible to the business and GST input tax credits are available.
Gifts to employees and their families that are not exempt minor benefits (e.g. gifts valued at $300 or higher per person) are subject to FBT. These gifts are tax deductible to the business and GST input tax credits are available.
Certain gifts may be exempt from FBT where they fall within specific limited exemptions within the FBT legislation (e.g. airport lounge memberships and tools of trade) regardless of their cost.
Non-entertainment gifts to clients
These do not give rise to any FBT liability, they are tax deductible to the business and GST input tax credits can be claimed.
The correct tax treatment of costs associated with Christmas functions can be confusing. Broadly, entertainment expenses such as Christmas party costs are only tax deductible, and GST input tax credits only available, to the extent that FBT is paid on the costs.
The following is a summary of the treatment of function costs, which will depend on the method used to value entertainment for FBT purposes. The Actual Method detailed in the first column is the one most commonly used by taxpayers.
Don’t get your tinsel in a tangle and contact your Ruddicks adviser if you have any questions or require any further information.
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The content of this newsletter is general in nature. It does not constitute specific advice and readers are encouraged to consult their Ruddicks adviser on any matters of interest. Ruddicks accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. This information is current as at 10 December 2019, and was published around that time. Ruddicks particularly accepts no obligation or responsibility for updating this publication for events, including changes to the law, the Australian Taxation Office’s interpretation of the law, or Government announcements arising after that time.
Any advice provided is not ‘financial product advice’ as defined by the Corporations Act. Ruddicks is not licensed to provide financial product advice and taxation is only one of the matters that you need to consider when making a decision on a financial product. You should consider seeking advice from an Australian Financial Services licensee before making any decisions in relation to a financial product. © Ruddicks 2019