The Meaning of Christmas – Tax Deduction, GST and FBT?
So it’s that magical time of year again – where we all wish we had a pool in the backyard and for those of us in Qld daylight savings!! (Yes I am a child of NSW and loved the whole daylight saving thing when I was growing up). Its also the time of year that the question of Christmas gifts and employees and Christmas party deductibility is doing the rounds in offices all over the country. So here are the basics.
Firstly, staff appreciate gifts – they don’t have to be expensive but something that says “thanks for your effort this year, enjoy your break” (if you are having a break for Christmas) really means something. So if you are not channelling the Grinch and are planning on staff gifts, there are two categories of gift you can give – a ‘non-entertainment gift’ or an ‘entertainment gift’. Hampers, gift vouchers or wine are non-entertainment gifts, and as long as the total value is less than $300, an employer can claim a tax deduction, the GST and be exempt from FBT. Happy days! Now if you are feeling like Chris Cringle and would like the gifts to be theatre tickets or a weekend break away, these are classed as entertainment gifts. Now with this type of gift, if the value is greater than $300, FBT is payable and a tax deduction is allowed. If the value is less than this, there will be no FBT, but also no tax deduction or GST claimable. Not so happy days. Best just stick to the wine. You can get a lot of wine for under $300.
Now Christmas parties. Why, oh why can it not be simple! Parties are classed as entertainment benefits by the ATO (Grinch). However, it also depends on where and when you decide to hold the party. If the party is to be held on the business premises on a working day, there is no limit on the cost for FBT purposes, but there is no tax deduction or GST claimable. If employee families attend, and the cost is more than $300 for the employee/family combined, FBT will be payable on the family portion and you will also be able to claim a tax deduction and GST. If the party is off site, we come back to the $300 FBT limit with no deductions for tax or GST. If you decide to have a finger food/light meal party with no alcohol then you can claim the lot. But I think I may be busy that afternoon.
If you have any questions, please contact our office on on 4151 8898.
The Money Edge | Bundaberg