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The festive season is upon us once again, which provides us with a great opportunity to review the deductibility of Christmas functions!
Generally speaking, Christmas parties are only income tax deductible to the extent that it is subject to Fringe Benefits Tax (FBT). If the costs are exempt from FBT, then the costs cannot be claimed as an income tax deduction.
FBT Exemptions
The major exemption from FBT would be if the Christmas party or gift constituted a minor benefit. Briefly, if the cost of providing the party/ gift to the employee (and/or the employees associate) is less than $300, this is a minor benefit and not tax deductible.
Also, if the Christmas party was provided to current employees on premises and on a working day, this would also be considered to be an exempt benefit. Any spouses attending this party would not be exempt unless it was a minor benefit.
The ATO website provides the following two tables which make the situation quite clear:
Christmas party held on business premises
Example: A small manufacturing company decides to have a party on its business premises on a working day before Christmas. The company provides food, beer and wine.
The implications for the employer in this situation would be as follows:
|
If... |
|
Then... |
|
current employees only attend |
|
there are no FBT implications as it is an exempt property benefit. |
|
current employees and their associates attend at a cost of $180 per head |
|
|
|
current employees, their associates and some clients attend at a cost of $365 per head |
|
|
Christmas party held off business premises
Example: Another 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.
|
If... |
|
Then... |
|
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 |
|
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