As we approach the end of another calendar year and wonder where the time went, many small business owners begin to plan Christmas parties which provide a chance for employers to thank staff for their support throughout the year. Staff Christmas parties and staff morale are essential to any effective organisation, and this needs to be managed easily in a way that is most beneficial for your business.
Most Christmas parties are organised without the slightest regard of what the tax man considers to be tax deductible, nor the consideration that they are providing a benefit to staff that is outside the safe definition of 'salary', and whether it is a fringe benefit .
The Australian Taxation Office's view is that the costs of a Christmas party are only deductible to the extent that they are subject to FBT. They have however stated that Christmas entertainment costs are part of the general FBT rules and come under the 'minor benefits' umbrella. This allows a $300 limit to 'incidental' benefits to be FBT free.
This may sound generous and allow employers to avoid the extensive FBT calculations and paperwork; however the exemption from FBT means that the employer is not entitled to claim the GST on the expenses, nor claim them as a tax deduction.
Apologies in advance if I have put a downer on your workplace festivities, however from all the team at GMG we wish you a safe and happy Christmas, and wish you all the best for the New Year!