Tips for a tax-free Christmas work party
1. Christmas Parties & Gifts
There are two things that business need to keep in mind with regards to tax and Chris tm as parties and gifts — these are the definition of minor benefits , and a $300 value.
There is a fringe benefits tax (FBT) exemption for providing minor benefits valued at les s than $300 that satisfy certain criteria — these being that they are provided to staff or their associates (their spouse, partner, family etc.), on an infrequent or irregular basis , and the benefits are not considered a reward for services .
The important thing to note however is that the $300 threshold applies to each benefit provided, not to a total value of associated benefits. So if, as a generous employer, you host a party and also give a gift to everyone, the party and the gift are considered separately for FBT. If each is less than $300, they are both generally FBTfree.
2. The party location is important
The most certain way to ensure festivities are kept taxfree is to host the party at your workplace during the working week, and to limit attendees to staff only. However if associates of employees attend, it is important to stay below the $300 minor benefit threshold to keep things FBTfree (see above).
If the Chris tm as party is away from the workplace, it is important to keep the cost per person (staff and their family) below this $300 threshold to retain minor benefit status — but remember this is a total of meals, drinks , entertainment and associated benefits .
3. Deduction and GST credits for employee gifts?
While in the giving spirit, the important thing to remember is that if a Chris tm as gift or benefit to an employee is exempt from FBT, such as a minor benefit, you probably won’t be able claim it as an income tax deduction, nor can you claim any GST credits from the purchase.
Whether a gift is deductible and GST credits can be claimed depends on whether the gift provided is nonentertainment or entertainment. The former includes gifts such as flowers , wine, beauty products , gift vouchers and hampers for example, while the latter includes item s of recreation such as tickets to a musical, theatre, movie, or sporting event.
The tax treatment where a gift is provided to an employee is best summarised in the following table:
| Gift to employee or associate | FBTLiability? | Income tax deduction? | GST credit available? |
| If gift constitutes “entertainment”Property
Minor benefit (< $300) |
Yes No |
Yes No |
Yes No |
| If gift constitutes “nonentertainment”Property
Minor benefit (< $300) |
Yes No |
Yes Yes |
Yes Yes |
4. Where do taxis stand?
For an employer thinking of paying for a taxi to get their staff from point A to point B, the important consideration in regard to this will be where exactly those points A and B are.
If the taxi travel is from work to a venue where the party’s being held (and vice versa), the Tax Office says this is all part of the fun and the fare can be included in the costperhead minor benefit limit. However if some staff members perhaps overload on the Christmas cheer and consequently are themselves loaded into a taxi to be taken home (not back to the workplace), this cost may attract FBT.
5. Are Santa’s pockets filled with cash?
If instead of giving gifts or covering the bar tab you would rather hand out cash bonuses to thank your employees for their hard work during the year, this payment is treated in the s am e way as salary and wages . PAYG withholding and super guarantee obligations will be triggered, and the Tax Office will treat this bonus as ordinary time earnings.
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