‘Tis the season, but before you get carried away with the presents and Christmas parties, there may be some tax implications when it comes to the season’s frivolity.
Are you aware that Fringe Tax Benefits (FBT) may actually apply to the fun you’ll have at your Christmas party and with your gift giving?
If you are not a tax-exempt organisation and do not use the 50-50 split method for meal entertainment, the following explanations may help you determine whether there are FBT implications arising from a Christmas party.
- The costs of food and drink associated with your Christmas parties are exempt from FBT if they are provided on a working day, on the business premises and consumed by current employees.
- A Christmas Party may be a minor benefit and exempt if the cost of the party is less than $300 per employee and meet certain conditions.
- Christmas gifts to employees may be a minor benefit that is an exempt benefit where the value of the gift is less than $300.
- The cost of providing a Christmas party to your employees is income tax deductible only to the extent that it is subject to FBT.
- The costs of entertaining clients are not subject to FBT and are not income tax-deductible.
If you’re unsure about how you might be affected, for example, if you are hosting your Christmas party off-premises, or if you are a tax-exempt organisation, speak to one of the Nexis team today.