5 tips for a tax-free Christmas party
While you should always feel free to pop a champagne cork or three for your employees to celebrate the year and holiday season, make sure that you don’t get the tax hangover! Fringe benefit tax and associated income tax and GST can sneak up on even the most organised of employers.
Here are five tips for to help you try to keep your Christmas work party tax-free.
1. Know your limits
$300 is the minor benefit threshold for fringe benefits tax (FBT), this is the key to your Christmas party and gifts remaining tax free.
At first glance a Christmas Party could be considered a benefit, depending on the circumstances of the party. However, the Christmas party could be exempt from FBT if its value is less than $300 per employee.
Another thing to note however is that the $300 threshold applies to each benefit provided, not to a total value of “associated benefits”. So if, as a generous employer, you host a party and also give a gift to everyone, the party and the gift are considered separately for FBT. If each is less than $300, they are both generally FBT-free. The minor benefit exemption is dependent on the facts, get in touch with one of our staff for assistance.
2. Location, Location
At your workplace: If you’re looking to ensure festivities are kept tax-free the best place to host the party at your workplace during the working week, and to limit attendees to staff only. However, if family of employees attend, it is important to stay below the $300 threshold and satisfy the minor benefit conditions.
Away from your workplace: Looking for something different this year? If the Christmas party is away from the workplace, it is important to keep the cost per person (staff and their family) below this $300 threshold, among other conditions, to retain minor benefit status — but remember this is a total of meals, drinks, entertainment and associated benefits.
Need a suggestion of where to go? Here are three great Christmas party venues in the CBD:
3. Employee gifts – what can you claim?
The important thing to remember is that if a Christmas gift or benefit to an employee is exempt from FBT, such as a minor benefit, you typically won’t be able claim it as an income tax deduction, nor can you claim any GST credits from the purchase. Whether a gift is deductible and GST credits can be claimed depends on whether the gift provided is “non-entertainment” or “entertainment”.
4. Where do taxis stand?
The important consideration in regards to this will be where exactly those points A and B are. If the taxi travel is from work to a venue where the party’s being held (and vice versa), the Tax Office says this is all part of the fun and the fare can be exempt from FBT under special rules. However if some staff members perhaps overload on the Christmas cheer and consequently are themselves loaded into a taxi to be taken home (not back to the workplace), this cost may attract FBT.
5. Does Santa have a Christmas bonus for you?
If you’d rather hand out cash bonuses to thank your employees for their hard work during the year, this payment is treated in the same way as salary and wages. PAYG withholding, super guarantee and payroll tax obligations will be triggered. The Tax Office will treat this bonus as ordinary time earnings.
If you are unsure about the FBT implications for your Christmas party or gifts, get in touch with one of our staff who can assist you today.