As we approach Christmas and the holiday season, it sometimes may get difficult to keep on top of your tax obligations. To ease matters, here is a comprehensive guide that highlights the key tax matters relating to Christmas parties and gifting.
Any Christmas gestures by you, whether it’s a staff Christmas party or gifting your staff members a hamper of a gift card may have certain tax implications.
Presents for staff members
Buying your staff members a present this Christmas? Keeping the amount below $300 per person may qualify it as a minor and fringe benefit (s 58p FBTAA 1986) and hence exempt from fringe benefits tax (FBT).
Hampers and gift cards may also be exempt from FBT if the value of each item is less than $300. To qualify as a minor benefit the presents must be infrequent and not ongoing, like memberships or subscriptions. The total value of similar benefits provided throughout the FBT year should also be considered.
Christmas bonus
If you are planning to provide cash bonuses to your employee, please note, a cash bonus is not treated as a gift and gets taxed as ordinary time earnings subject to PAYG withholding and superannuation guarantee provisions.
Staff Christmas Party
The cost of food and drink associated with a Christmas party is exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. This exemption is only available for employees, not associates.
If a Christmas party is not held on the business premises and the cost per person is less than $300, it may also be exempt from FBT under the minor benefits rule.
The ATO expects that the identical or similar benefits are provided infrequently but regularly (ie every Christmas) to qualify for the minor benefits exemption.
If the cost per person is more than $300 and FBT gets levied on the business, the overall cost can be claimed as a tax deduction as at year end.
Presents for staff members while attending the Christmas party
If you give your staff members their Christmas presents at the Christmas party, the benefits become associated benefits, but each benefit needs to be considered for the exemption separately.
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The team at EMspire Advisory are trusted, qualified Chartered Accountants, tax agents, and small business accountants. We work closely with our clients to achieve the best possible outcomes. To find out more, please contact us!
Please note that this information is not specific and is general in nature and cannot be relied on as advice. Please contact us for advice specific to you and your circumstances.