As the holiday season approaches, businesses are gearing up for festive celebrations, considering both staff and client relations. However, it's crucial to be mindful of the tax implications associated with these activities. Let's delve into the considerations surrounding staff Christmas parties and client gifts.
Staff Christmas Parties on Business Premises: FBT Insights
If you choose to host your staff Christmas party in the office during a workday, you may find relief from Fringe Benefits Tax (FBT), regardless of the amount spent per employee. This is due to the party qualifying as an exempt property benefit. It's important to note, though, that there is no tax deduction available, and GST is not claimable in this scenario. The exemption extends to family members attending, and any taxi travel originating or concluding at an employee's workplace is also exempt from FBT. So, if a few team members need a taxi ride home after enjoying the festive spirit, the commute is exempt from FBT.
Staff Christmas Parties off Business Premises: Navigating the $300 Threshold
Should you decide to host the Christmas party off the business premises, it's advisable to keep the celebration cost below $300 per person. Staying within this limit generally exempts you from paying FBT, as amounts below $300 per person are considered minor benefits. In such cases, both the party and taxi travel can be FBT-free. However, if the celebration exceeds this threshold, you may need to pay FBT. The silver lining is that you can then claim a tax deduction and GST credits for the event's cost.
Client Gifts: A Tax-Efficient Alternative
Rather than opting for pre-Christmas entertainment, businesses have the option to present gifts to clients. Not only does this save on excess calories, but it also offers tax benefits, including no FBT, tax deductions, and GST input tax credits. It's important to note that the key here is building and strengthening client relationships with the expectation of continued business. The link between the gift and revenue generation is crucial. Non-entertainment benefits, such as Christmas hampers, bottles of wine or whisky, gift vouchers, flowers, or pen sets, generally qualify as tax-deductible. To substantiate these deductions, maintaining proper records is essential.
In conclusion, a thoughtful approach to staff Christmas parties and client gifts not only fosters a festive atmosphere but can also bring tax advantages. As the holiday season unfolds, businesses can spread cheer while staying in compliance with tax regulations.
Disclaimer: The material and contents provided in this blog are general guide and informative in nature only. They are not intended to be seen as legal and tax advice. If expert assistance is required, you should seek your own advice for any legal, tax or investment issues raised in your affairs.