Don't Let the Office Holiday Party Leave you with a Tax Headache: What You Need to Know About Holiday Parties & FBT

Accounting Director Matthew Bartemucci provides some timely tips on Fringe Benefits Tax when preparing for upcoming business holiday parties so you can enjoy the festivities without nursing a tax headache later.

As the holiday season approaches, many businesses are gearing up for Christmas parties to celebrate the year with employees. However, it's important to keep Fringe Benefits Tax (FBT) in mind when planning these events. FBT applies to benefits employers provide to their employees in place of salary or wages, including festive gatherings.

When Does FBT Apply to Christmas Parties?

FBT may apply depending on:

Where the party is held:

• On business premises - If the party is held at the workplace during a workday, it is generally exempt from FBT for employees, although it may still apply to their family members.
• Off-site - Parties held at a restaurant or venue may incur FBT, depending on the total cost per attendee and other factors.

Costs per person:

• If the cost per employee or guest is under $300 (including GST), the "minor benefits exemption" may apply, potentially exempting the event from FBT.

Who attends:

• Exemptions are more likely to apply if only employees attend. However, including family members may increase the likelihood of FBT being charged.

Deductibility of Christmas Party Costs

• FBT-exempt parties: Costs are generally not tax-deductible, and no GST credits can be claimed.
• FBT-attracting parties: Costs can be tax-deductible, and GST credits may be claimable (reminder FBT is taxable at 47%).

Tips to Minimise FBT on Christmas Parties

1. Keep costs per head below $300 to take advantage of the minor benefits exemption.
2. Host the party on business premises during regular working hours.
3. Avoid providing gifts in association with the Christmas Party, which could push the total benefits provided to each employee above $300.

Understanding the FBT implications of your professional Christmas celebrations can help you enjoy the festivities without unexpected tax surprises. Consult a tax professional to ensure compliance and appropriate planning ahead.

Matthew Bartemucci, the author of this piece and an Accounting Director at Hood Sweeney, can be reached on 1300 764 200 or Matthew.Bartemucci@hoodsweeney.com.au