Planning the Work Christmas Party? Read This Before You Book
It's late October, which means someone in your business is already asking about the Christmas party.
Where you hold it, who you invite and how much you spend per head can decide whether you pay fringe benefits tax, and whether you can claim the cost at all.
There's no special Christmas party law. The normal FBT rules apply, and they catch people out every year.
The Number to Remember Is $300 (Per Head, Not Per Event)
Under the minor benefits exemption, a benefit worth less than $300 per person, provided infrequently, generally isn't subject to FBT.
It's tested per person and per benefit. And it has to be under $300. Exactly $300 doesn't qualify.
It's also based on who actually turns up. If a few people pull out and the cost per head creeps over $300, the exemption can be lost.
On Site or Off Site?
Holding the party at your business premises on a working day is the simplest option:
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Employees: food and drink on your premises on a working day is generally exempt, whatever the cost
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Partners and family: exempt if the cost per head is under $300
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Clients: no FBT at all
Off site, at a restaurant or venue, it's different:
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Employees and their partners: exempt only if the cost is under $300 per head
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Go over $300 and FBT applies to the full amount, not just the excess
With FBT charged at 47%, that's an expensive line to cross.
Gifts Are Counted Separately
A Christmas gift is treated as a separate benefit from the party. The two aren't added together.
So a party under $300 a head and a gift under $300 can both be exempt.
The type of gift matters for your deduction, though:
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Hampers, wine and gift vouchers are generally still tax deductible
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Entertainment gifts, like event tickets, generally aren't deductible if they're exempt from FBT
The Trade-Off Most People Don't Expect
Here's the part that surprises people.
If your party is exempt from FBT, you generally can't claim a tax deduction or GST credits for it.
If FBT does apply, the cost becomes deductible and you can claim the GST back. That doesn't usually make it the better option, but it's worth knowing when you set your budget.
The same goes for clients. Entertaining clients doesn't attract FBT, but it isn't deductible either.
Before You Book
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Work out a realistic cost per head, including drinks, venue hire and any transport you're paying for
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Decide early whether partners are invited
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Keep a record of who actually attended
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Budget for gifts separately from the party
Want to Get This Right?
A quick chat before you book can save you a surprise FBT bill next year.
To book an appointment, contact our office.