3 tax factors to consider when planning your Christmas party

The majority of Australians expect employers to pay for Xmas parties.

The holiday season is fast approaching, which means many organisations will already be in full flow with their Christmas party planning. If you're an employer, chances are your staff will be expecting you to foot the bill for the festivities.

The Transport and Tourism Forum found that nearly half of Australians believe their boss should pay for food and drink at a Christmas bash. A further 22.4 per cent believed their travel expenses should also be covered.

Non-entertainment gifts that cost less than $300 are tax deductible, offer a GST credit and pay no FBT.

However, are you aware of your tax obligations for Christmas parties? We don't want to ruin your festive fun, but there are several factors that you may need to consider when organising your Christmas celebrations, particularly in relation to fringe benefits tax (FBT).

FBT is levied on benefits that you provide to employees outside their typical salary or wage. For more information please get in touch with a qualified tax accountant in Geelong.

1. Is it an office party?

You won't have to pay FBT if you hold your party at your business premises on a working day before Christmas and only current employees attend. This is also true for staff members' families who are invited, as long as the festivities cost less than $300 per person with GST included. However, a taxable fringe benefit does arise when families attend and the cost is more than $300 per head.

2. Are we celebrating off-site?

The rules are only slightly different if you decide to have your annual celebration off-site, such as in a restaurant or bar. In this case, you will also incur FBT charges for employees as well as families when the cost is $300 or more per person. Meanwhile, FBT is not an issue when clients are invited, but you won't be able to make a GST claim or income tax deduction for their attendance.

Tax accountants and Christmas party FBT. Do you know what your tax obligations are for the Christmas party?

3. Will employees receive gifts?

Gift giving can be difficult at the best of times, but bringing tax obligations into the equation can make the situation even more complicated. If you want to provide presents to your employees, there is a difference between 'entertainment' and 'non-entertainment' gifts – the former includes flowers, hampers and bottles of wine, while the latter may be theatre or sporting event tickets.

Non-entertainment gifts that cost less than $300 are tax deductible, offer a GST credit and pay no FBT, whereas entertainment gifts below $300 are not typically tax deductible and do not provide GST credits.

These are just some of the tax ramifications of your Christmas party, but for a full breakdown of the rules, please contact WMC Accounting.

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