What you can Claim

As the 2013 year draws to a close, many small businesses are planning and looking forward to the festive season and end of year celebrations with colleagues. Without trying to dampen the good mood this time of year brings, it is worth mentioning that the money you spend on a Christmas party is often not a tax-deductible expense, both for GST and income tax purposes.

As a general rule, Christmas gifts that are supplied to an employee or their associate are subject to FBT unless they fall under an exemption. The two main exemptions to FBT that could apply to Christmas parties are the property benefits and the minor benefits exemption.

The cost of providing a Christmas party (or any form of entertainment) is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT (that it, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction. The costs of entertaining clients are not subject to FBT but they are not tax deductible.

The most tax effective way to reward your staff this Christmas is with a non-entertainment gift such as perfume, flowers and gift vouchers valued under $300. These expenses are not subject to FBT and are fully tax and GST deductible. However, providing staff with entertainment related gifts such as movie or sporting event tickets are considered as entertainment and whilst if kept under $300 are not subject to FBT, you are unable to claim a tax deduction or GST credit for such expenses. Gifts that exceed $300 per person are subject to FBT.

To ensure you don’t end up with a post Christmas party hangover, speak to our accountants at The Quinn Group who can provide you with advice in relation to fringe benefits tax and tax deductible expenses. Submit an online enquiry or call us on 02 9223 9166.