Many employers hold Christmas parties and give gifts to employees during the festive season, but may not be aware of the Income Tax, GST and Fringe Benefits Tax (FBT) implications.
Christmas Gifts Generally, where the value of a gift given to an employee and their family members is $299 or less, then it is exempt from FBT.
If the gift of $299 or less is NOT entertainment, it is also tax deductible and a GST credit can be claimed, for example: - Christmas hamper, bottle of wine, gift voucher etc. If the gift of $299 or less IS considered entertainment, it is NOT tax deductible and a GST credit cannot be claimed, for example: - ticket to attend the theatre, movies, sporting event or amusement park, accommodation or airline ticket.
A gift to clients or suppliers does not attract FBT, is tax deductible and the GST credit can be claimed. Christmas Parties The FBT and tax treatment of Christmas parties is slightly more complicated, depending on the method chosen to calculate FBT and the cost of the entertainment provided. It does not matter whether the event is held on the employer's premises or at another venue.
Actual FBT method:
• food, drink and entertainment cost $299 or less per head – no FBT, but not tax deductible and no GST credit claimable
• food, drink and entertainment cost more than $299 – FBT payable, but is tax deductible and GST credit claimable
50:50 FBT method:
• food, drink and entertainment (irrespective of cost) – 50% FBT payable, 50% tax deductible and 50% GST claimable
Food, drink and entertainment provided to clients and suppliers do not attract FBT, but are not tax deductible and a GST credit cannot be claimed.