Tax-free Christmas Work Party – Top 5 Tips!

Don’t get a tax hangover …

How To Have A Tax Free Christmas Work Party ... image
How To Have A Tax Free Christmas Work Party …

Christmas is almost here and while you should feel free to pop some champagne corks for your staff, you want to make sure that you don’t get a tax hangover; particularly with fringe benefit tax and associated income tax and G.S.T. pitfalls.

Top 5 tips to keep your Christmas tax-free:

  1. Give until it doesn’t hurt. There is a fringe benefits tax (FBT) exemption for providing minor benefits valued at less than $300. Also note that the $300 threshold applies to each benefit provided, not to a total value of “associated benefits”.
  2. The location of tour work Christmas party is important.  The best way to make sure your celebrations are kept tax-free 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 threshold. If the Christmas party is away from your workplace, it is important to keep the cost per person (staff and their family) below this $300 threshold.
  3. Deduction and GST credits for employee gifts? While in the giving spirit, the important thing to remember is that if a Christmas gift or benefit to an employee is exempt from FBT, you typically 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 “non-entertainment” or “entertainment”. The former includes such gifts as flowers, wine, “beauty” products, gift vouchers and hampers for example, while the latter includes items of “recreation” such as tickets to a musical, theatre, movie, or sporting event.
  4. Where do taxis stand in this scenario? The important consideration in regard to this will be where you pay for a taxi to get staff from point A to point B. 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 cost-per-head. 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 you hand out cash bonuses to thank your employees for their hard work during the year, this payment is treated in the same 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.

For advice about minor fringe benefits, fringe benefits tax, and associated income tax and GST, please contact our chartered accountants at St. George, Sydney.

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