Christmas Party

Did you know..?

Christmas party – We are frequently asked the question “Can we claim our staff Christmas Party?”. Our answer in short is NO. There are a lot of issues to consider surrounding Christmas parties (including the cost spent per employee and whether spouses or clients are present) but essentially, they are seen as an entertainment expense by the ATO. Entertainment expenses are by their very nature non-deductible.

If your Christmas Party exceeds the $300 pp minor benefit exemption there may be FBT consequences to consider too. Our basic view is that any entertainment expenses incurred by a business will be classified as such and shown clearly in your accounts – any further discussion can be had with your accountant at year end to confirm your position.

Christmas Parties and FBT

The treatment of FBT comes into effect when the cost of $300 has been reached and/or exceeded. This is in conjunction with any are other conditions that meet and pertain to FBT.

The cost of providing a Christmas party is income tax deductible to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT cannot be claimed as an income tax deduction. GST credits can only be claimed to the extent that a cost is tax deductible. Therefore, if you cannot claim it as a deduction, you cannot claim the GST credits either.

The provision of a Christmas party for an employee may be a minor benefit and exempt from FBT if the cost of the party is less than $300 per employee and certain conditions are met. This provision also applies to the employee’s associate (family member) or spouse.

Christmas party held at your premises on a work day

If only employees attend No FBT, NOT tax deductible
Employees & spouses @ $180pp No FBT
(minor exemption applies for spouse)
Employees & clients @ $365pp Employees – No FBT and not tax deductible
Clients – No FBT and not tax deductible
Employee associate @ $365pp (family members) FBT applies as value more than $300pp

Christmas party held at other premises

Only employees attend @ $195pp No FBT (minor exemption applies)
not tax deductible
Employees & associates @ $195pp No FBT (minor exemption applies for both)
not tax deductible
Employees, associates & clients @ $365pp Employees & associates – FBT applies as value more than $300pp.
Clients – No FBT and not tax deductible

The ATO have guidelines in regards to FBT as it relates to different business structures. Speak with your Tax Agent for more assistance.
Source: Institute of Certified Bookkeepers Client eBrief December 2017

Tashly Consulting Xero Bookkeepers Adelaide are Registered BAS Agents #86318001 and we are dedicated to providing seamless, high-quality, transparent bookkeeping services – If you would like any further information please contact us via telephone (08) 8121 4424 or via email.

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Disclaimer: All or any advice contained in this blog/newsletter is of a general nature only & may not apply to your individual business circumstances. For specific advice relating to your specific situation, please contact your accountant or other professional adviser for further discussion.