As we come into the “silly season” let us share with you the rulings on what the ATO will consider a deductible expense and what they won’t.
Staff Christmas Party
Generally if a party is held on business premises, on a workday, and no alcohol is provided, the party would be tax deductible.
Where the business is registered for GST, they would also be entitled to claim the GST back on the cost of the Christmas party.
If the party is held off premises then it unfortunately would not be tax deductible, however if the business was liable and had paid Fringe Benefits Tax on the event, the event would be deductible in full.
Further Fringe Benefits Tax details:
The Minor Benefits Exemption allows a business to avoid paying FBT on a benefit provided to your employee or associate such as an off premises Christmas Party where the benefit given meets certain criteria. A minor benefit is one that is:
- Provided to staff or their associates, for example their spouse or partner
- Provided on an “infrequent” or “irregular” basis
- Not considered a reward for services, and
- Costs less than $300 “per benefit” inclusive of GST.
Staff gifts are non-tax deductible.
Staff gifts are also subject to Fringe Benefits Tax as they are a non-cash benefit provided to your staff.
Client gifts are generally tax deductible including the GST credits (where applicable) if they are non-entertainment gifts. However, gifts to clients that are deemed entertainment are non-deductible.
If any of this seems confusing please feel free to reach out with your specific situation, and we can navigate all the rules for you.