Christmas parties held away from work premises and tax

Want to hold your Christmas party away from work and understand the tax consequences.

Fringe benefits tax and the rules concerning deducting the cost of entertainment apply.

If the cost is less than $300 per head, the cost is considered an ‘exempt minor benefit’ and not subject to FBT. However, the cost of ‘exempt minor benefits’ are not tax deductible and you can not claim the GST.

Below is the ATO guidance.

Christmas party held off business premises
The costs associated with Christmas parties held off your business premises (for example, a restaurant) will give rise to a taxable fringe benefit for employees and their associates unless the benefits are exempt minor benefits.

Example
Another company decides to hold its Christmas function at a restaurant on a working day before Christmas and provides meals, drinks and entertainment.

Employer implications
The implications for the employer in this situation would be as follows.

If current employees only attend at a cost of $195 per head

then there are no FBT implications as the minor benefits exemption applies.*

If current employees and their associates attend at a cost of $180 per head

then there are no FBT implications as the minor benefits exemption applies.*

If current employees, their associates and clients attend at a cost of $365 per head

Then
for employees – a taxable fringe benefit will arise
for associates – a taxable fringe benefit will arise, and
for clients – there is no FBT payable and the cost of providing the entertainment is not income tax deductible.

* Where the benefits are indicated as qualifying for the minor benefits exemption, it is on the basis that the necessary conditions have been satisfied.