Having a Christmas Party?
Like most other businesses, at Stellar Accounts we love Christmas and parties, so we are in love with Christmas parties! And we want to make sure that we look after our staff and clients while maximising any related tax benefits.
Do you understand the ATO rules in relation to Christmas Parties and tax deductions?
The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction.
Unfortunately the costs of entertaining clients are not subject to FBT and are not income tax deductible.
Below are some scenarios based on examples which the ATO has provided.
You decide to have a Christmas party in your office. It will be on a regular working day and only staff are invited to attend. Food and alcohol is provided
A: FBT is not payable on the Christmas Party as it is exempt property benefit. Therefore a tax deduction cannot be claimed for this event.
Your Christmas party is held on a regular working day in your office and only current staff and their partners are invited to attend. Food and alcohol is provided.
A: If the value of the food and alcohol is less than $300 per person, no FBT is payable due to the benefit being considered both an exempt property benefit and a minor benefit for the respective parties. As FBT is not payable in this instance, a tax deduction cannot be claimed for this event.
However, if the value of the food and alcohol is $300+ per person, FBT applies only to the partner’s share which will be tax deductible.
Your Christmas party is held at a restaurant and only staff and their partners are invited to attend.
A: FBT is payable for both the staff and their partners. A tax deduction can be claimed for the cost of the Christmas party plus the associated FBT.
See link to ATO guideline – https://www.ato.gov.au/…/In-deta…/FBT-and-Christmas-parties/