Christmas parties - a taxing matter!
19.2.2010
Other than arranging the catering and hanging the tinsel, it is also important to consider the Fringe Benefits Tax (FBT) implications arising from a Christmas party.
Whether or not FBT applies will primarily be dependant on how you celebrate Christmas with your staff. How you account for other entertainment provided during the year is also a factor.
There are different rules for celebrations held on your business premises to those held away from your premises such as at a restaurant. The rules can change again if partners of your employees attend the function.
The one thing that is clear is that if you do not have to pay FBT on your Christmas party, you will not be entitled to an income tax deduction for the party, nor will you be entitled to claim back the GST incurred.
But there is some good news. You can benefit from giving your staff a Christmas present. Gifts under $300 should be free of FBT so long as they meet the requirements to be classified as a minor benefit. Further, if they are not considered to be entertainment (such as bottles of alcohol, perfume, gift vouchers, hampers etc) then you can claim an income tax deduction and also the GST from the taxman.
Thus, before you throw that lavish office party, you may want to consult Kensington Partners to work out what it is really going to cost you.