Many businesses are planning their end of year celebrations and Christmas parties.  Some are considering what gifts, if any, they will be providing clients and employees.  

An important issue to consider is the possible FBT (Fringe Benefit Tax) and income tax implications of providing "entertainment" to staff and clients.  If you need some assistance with this complicated area contact us for advice today.

One of the major considerations is the "less than $300" minor benefit exemption and the fact that the Tax Office now accepts that different benefits provided at (or about) the same time are not added together when applying the threshold.

This means that a Christmas party and gifts may be exempt from FBT, even if provided at the same time, as long as each costs less than $300!     

Gifts which ARE NOT entertainment (ie. tax deductable) generally include:

• a Christmas hamper, a bottle of whisky, wine etc and
• gift vouchers, a bottle of perfume, flowers, a pen set etc

From a tax view point it is better to give presents (gifts) which ARE NOT entertainment.   

Gifts which ARE considered entertainment (neither tax deductible nor subject to FBT) generally include:

• tickets to attend a theatre, live play, sporting event, movie or the like; and
• a holiday airline ticket or admission tickets to an amusement centre.

Example of a party and presents. 

An employer holds an external Christmas party for employees and their spouses.  The cost of food and drinks per person is $250, and no other benefits are provided.

Assuming the actual method is adopted:

• for employees attending with their spouses - no FBT is payable (ie. the cost per head is less than $300).
• for employees attending alone - no FBT is payable (ie. the cost per head is less than $300).

In either case, no tax deductions will be allowed.

Assuming the 50/ 50 method is adopted:

• 50% of the total expenditure is subject to FBT and is tax deductable.

If this still doesn't make sense contact us and we can give you advice on your specific circumstance.