Tis the season for celebrations, and whether you’re planning a staff party or spreading cheer with gifts for your team and clients, it’s essential to stay within the tax rules. Let’s unwrap the key points on tax deductibility, GST, and fringe benefit tax (FBT) so you can sleigh your festive planning.
Lets break it down:
Staff Parties – Deck the halls and claim those costs
Throwing a festive bash for your team, whether held at the office or a venue, are generally 50% tax-deductible under the entertainment tax rules. This includes the cost of:
- Food and drink
- Venue hire
- Entertainment activities…. to boost the holiday spirits
GST Implications
GST is also 50% claimable for expenses so keep those invoices handy when the party ends.
Fringe Benefit Tax (FBT) Generally celebrations like a Christmas party are typically exempt from FBT as they fall under the “workplace social event” exemption. However if the party provides specific perks (e.g transport, accommodation, gifts or vouchers for employees), these might attract FBT.
Staff Gifts: Tokens of Appreciation
Monetary Gifts
Cash bonuses under the Christmas tree are treated as taxable income for the employee and are subject to PAYE.
Vouchers are subject to FBT as they are considered fringe benefits.
Non-Monetary Gifts
Gifts (generally excluding food and alcohol) i.e that are not consumable are 100% tax-deductible if they’re under the $300 per quarter, per employee FBT exemption threshold. (or annual threshold of $22,500 for all employees) If this limit is exceeded, FBT applies to the total value of gifts.
GST Implications
GST can be claimed in full on non-monetary gifts (except gift vouchers), spreading even more holiday cheer
Client Parties: Networking or Socializing?
If you’re hosting a client party
50% deductible: Food, beverages, and entertainment expenses (e.g., venue hire) when it’s part of a social or networking event.
100% deductible: If the event has a direct business purpose, such as a product launch or promotional event.
GST Implications
The same 50% rule applies to GST claims for entertainment expenses that are only partially deductible.
Client Gifts: Building Relationships
Business-Related Gifts
Gifts like branded merchandise, diaries, or calendars that promote your business are 100% deductible and GST is fully claimable.
Gifts with entertainment value (e.g., foor & wine or movie tickets) are only 50% deductible and 50% GST claimable.
General Gifts (excluding food & drinks)
When it comes to spreading holiday cheer, general gifts (excluding food and drinks) can be your best friend! Not only are these delightful presents typically 100% deductible, making them a tax-savvy choice, but they also carry the warmth of the season. However, finding the perfect non-consumable gift can be a bit of a challenge
Lets wrap it up…Santa’s check list for the Festive Expenses
- Track expenses carefully: Categorize costs for accurate tax treatment.
- GST adjustments: Remember that GST claims follow deductibility rules.
- Most tax savvy choice is a non-consumable gift.
- Know the thresholds: Keep staff gifts under $300 per quarter to avoid FBT.
Need help navigating the holiday tax maze? ExpertEase is here to make your festive planning stress-free! Get in touch, and we’ll ensure your season is merry, bright, and compliant.
Happy holidays from all of us at ExpertEase.
