Every year, there is much confusion over what a business can claim as a taxable supply around the annual Christmas Party and gift giving. The rules are pretty complicated but here is a summary:
This exerpt is from www.ato.gov.au
‘The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction.’
In other words:
If a Christmas party is held on your premises on a work day:
It is not subject to FBT, and is not tax deductible if:
- Only employees attend
- Current employees and Spouses attend at $300 or less per person
- Employees and Clients attend at $300 or less per person
Any costs above $300 per person for employee associates only may be claimed and FBT will apply
If a Christmas party is held at another premise:
It is not subject to FBT, and is not tax deductible unless
- For employees and associates, FBT applies and a tax deduction may be applied if the value is more than $300 per person
Unfortunately, for the vast majority of circumstances, Christmas parties are not a tax deduction and are not a taxable supply. Please see https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/FBT-and-Christmas-parties/ for more information
Client and Employee Gifts
Which gifts can be claimed?
If the gift is not classified as ‘entertainment’, gifts to employees and clients may be claimed as a tax deduction and GST credits can be claimed under the following circumstances
- If the gift is less than $300, it is considered a ‘minor benefit’ and may be claimed as a business expense
- Gifts over $300 may incur FBT and may still be claimed as a business expense
- These gifts may include food, wine, hampers, vouchers, gift cards etc.
Gifts you can claim include:
a Christmas hamper
a bottle of whisky
a bottle of perfume
a pen set.
Which gifts cannot be claimed?
Gifts that contain an ‘entertainment’ element such as a holiday, membership to a club, tickets to a theatre, sporting, movie or musical event cannot be claimed if they are under $300
- If these gifts are over $300, they may be claimed but will be subject to FBT
Gifts you cannot claim are tickets to:
a live play
a sporting event
a holiday, including an airline ticket
an amusement centre.
If you would like more information about what Christmas expenses you can claim in your BAS, please contact us