Merry TaXmas

16th December 2019

You may be planning to reward your staff for the festive season?

However, you must consider the tax implications.

 

Year-end (and other) staff parties

Issues to consider, including the possible FBT and income tax implications of providing ‘entertainment’ (including Christmas parties) to staff and clients.

 

Minor Benefit Exemption

The minor benefit exemption provides an exemption from FBT for most benefits of ‘less than $300’ that are provided to employees and their associates (e.g., family) on an infrequent and irregular basis.

The ATO accepts that different benefits provided at, or about, the same time (such as a Christmas party and a gift) are not added together when applying this $300 threshold.

However, entertainment expenditure that is FBT-exempt is also not deductible.

 

Wayne’s Thoughts 

‘Less than’ $300 means no more than $299.99! A $300 gift to an employee will be caught for FBT, whereas a $299 gift may be exempt.

 

Example: Christmas Party

An employer holds a Christmas party for its employees and their spouses – 40 attendees in all.

The cost of food and drink per person is $250 and no other benefits are provided.

 

If the actual method is used:

  • For all 40 employees and their spouses – no FBT is payable (i.e., by applying the minor benefit exemption), however, the party expendidture is not tax deductible.

If the 50/50 method is used:

  • The total expenditure is $10,000, so $5,000 (i.e., 50%) is liable to FBT and tax deduction