With Christmas fast approaching it is timely to consider how the ATO treat the office Christmas Party.
If you’re planning on holding the party at your premises on a working day, the costs (food and drink) are an exempt property benefit to current employees for Fringe Benefits Tax purposes, and as such cost is not an issue.
If you’re planning on holding the party elsewhere at a function centre or other venue, then the party may still fall into the ATO’s minor benefit exemption, provided the cost for each employee is less than $300, and it’s not a regular occurrence.
And the ATO have changed their views on associated benefits, ie: providing a gift to employee’s as well as the cost of the function. Whilst they are associated, the ATO will consider each item separately when looking at the $300 minor and infrequent limit. So for those of you looking to treat your employees, that change will be welcome news. You could provide a function up to $300 per head, as well as a gift to that limit also.
Associates of Employees
When looking at the in-house function, remember that associates of employees (such as a spouse or partner) are not part of that exemption, but if the minor and infrequent rules are met, they could be exempt under those rules.
The costs of entertaining clients are not subject to Fringe Benefits Tax, however they are also not deductible for income tax purposes, nor can you claim the GST.
Tax Deductibility of Christmas Party
You also need to remember that, unless the party is subject to Fringe Benefits Tax, it is not tax deductible, and nor can you claim GST on the costs.
written by Natalie Spillane