Do you want to know more?

It’s coming up to the Christmas holiday period which means scheduling the staff Christmas party and purchasing gifts for your employees, but as we skip into the month of December, it’s important that we remember what is deductible in relation to gifts and entertainment provided and how fringe benefits tax [FBT] relates with these actions.

FBT is payable by employers on the value of certain benefits that have been provided to their employees in respect of their employment. The purpose of the legislation to ensure fair tax treatment between cash paid to employees and benefits provided to them during their employment. Fringe benefits can include but are not limited to: providing an employee a vehicle that is owned by the business to drive, providing a loan to an employee with no interest, and also functions and gifts provided to an employee at Christmas time.

Towards the end of December, many employers schedule a work breakup or event to celebrate the holidays with their employees or purchase a gift for the employees and their families. These events can include costs such as venue hire, food and alcohol purchases or booking entertainment such as a band. Are these expenses tax deductible? Is the employer entitled to claim goods and services tax [GST] back on those expenses incurred?

Generally, providing entertainment to an employee is not tax deductible unless FBT is paid. Employers cannot claim deductions for the cost of Christmas gifts purchased for employees if the gift directly provides entertainment by way of food, drink or recreation. Similarly, the expense of a staff Christmas function would not be deductible as it involves the provision of entertainment.

However, there are some exceptions. The cost of a Christmas party is tax deductible if provided on a working day on the business premises and consumed by current employees. Another exception is providing a minor benefit by ensure the cost of the Christmas party and gifts are less than $300 per employee. And when it comes to GST, the credit is available if FBT is paid or the benefit is exempt from FBT and a tax deduction can be claimed.

If you are providing more than salary and wages to an employee, now is a good time to book an appointment with one of our accountants to ensure you are not inadvertently paying more tax than necessary by providing a non-cash benefit to your employees.

 

Jamie Arrington – Manager

B.Com CA

Recent Posts

GST… Do We, Can We, Should We?

GST + The National Disability Insurance Agency… Do We, Can We, Should We? Written by: Anthea Taylor l NDIS Plan Management Team   This time last year, we wrote about...

Read More

Jana Clack – Independent Finance Broker

From working for one of Australia’s largest independent finance broking firms and taking a short hiatus before returning to the industry in 2021 to set up as a broker herself...

Read More

Steps to Starting A New Business

Steps to Starting A New Business Written by: Anshul Gupta l Accounting Team   While there are many Australians who dream about being their own boss, the reality of setting...

Read More

Assessment of the Former Home When Entering Into Aged Care

What Happens To The Family Home When Moving Into Aged Care? Written by: Samantha Butcher l Advisory Team   A question we are asked every day by our clients, who...

Read More

The ‘Power’ in Power of Attorney

The ‘Power’ in Power of Attorney Written by: Karlene Wightman l Legal Team   It’s a common myth that when you divorce or separate from your partner that your Powers...

Read More

Facts Matter

Facts Matter (When It Comes To the National Disability Insurance Agency) Written by: Anthea Taylor l NDIS Plan Management Team   As the saying goes, never let the truth get...

Read More