What is tax deductible at Christmas?
It’s party season! I do love Christmas. It is all about spending time with family in a happy atmosphere – the presents are an added bonus!
Work Christmas parties are abounding as well. To avoid a tax hangover at this time of the year, make sure you know what you can, and can’t, claim as a tax deduction when it comes to work Christmas parties and gifts.
Entertainment of clients
A purely social function for your clients, whether at your offices or at a different venue, is not tax deductible.
If your function isn’t purely social, e.g. working lunch, then read this blog post to understand what you can claim... 8 common tax-deductible expenses.
Entertainment of staff
A social party solely for your staff (employees) is not tax deductible, but it may be subject to Fringe Benefit Tax.
Where the cost per employee is less than $300 (including the GST component) it is considered to be a minor fringe benefit and exempt from Fringe Benefit Tax.
This is general information only. Please do get advice on this area as it is complicated (especially if your business has contractors and they’re also attending the party) as you don't want to get it wrong.
Pro tip: Keep a note in your bookkeeping system of who RSVP'd to the party (for the purposes of Fringe Benefit Tax calculations). Your tax agent will ask you for this information - maybe not for months - so make it easier on yourself by recording the details now.
Gifts for clients
Gifts to clients are tax deductible – they must be given to the client unopened.
Gifts for employees
Gift for employees are not tax deductible and may also be subject to Fringe Benefit Tax. The same $300 exemption may apply as mentioned above.
Taxis home after the party for your employees
If the taxi has been provided to employees it will only be exempt from Fringe Benefits Tax if it is a single trip that begins or ends at the employee's place of work.
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Disclaimer
On this website and my social media accounts I provide information about taxation issues, legislation and business management for Australian business owners. This information is provided solely for your education and development as a business owner, with the intention of helping you to understand your business finances, cash flow, and taxation obligations and to assist you in making confident business decisions.
Please be aware that the generalised information I provide is not a substitute for specialist advice tailored to your individual circumstances. Do not take action or make major business decisions without first seeking independent, appropriately qualified professional advice specific to your individual needs.