With Christmas just around the corner, many business owners will be organising their staff Christmas parties or wondering whether they should buy gifts for their staff, clients or suppliers.
Subject to the value of the staff Christmas party held off the premises being less than $300 per head, the benefit for each staff member is exempt from Fringe Benefits Tax, but not tax deductible, nor is it GST claimable!
In all situations neither FBT nor tax deductions apply to any food or drink supplied to a client or supplier.
The tax treatment of gifts for staff depends on whether the gifts are entertainment or non-entertainment. Entertainment gifts would include tickets for sporting events or functions, movies, holidays etc. These would attract FBT and the expense would be tax deductible, except where the minor benefits exemption (< $300) applies, in which case there is no FBT liability and the expense would not be deductible.
In the case of non-entertainment gifts such as hampers, bottles of spirits, wine, flowers, perfume, gift vouchers etc, a tax deduction is allowed and FBT would be payable unless the minor benefits exemption (< $300) applies, in which case the gifts would nevertheless be tax deductible.
No FBT is payable and the expense is tax deductible where non-entertainment gifts are provided, but in the case of entertainment gifts provided there is, of course, no FBT and the expense is not tax deductible.
That’s up to you, but the most tax effective thing to do is keep the cost below $300 per staff member, making sure that the gift is non-entertainment and therefore fully tax deductible and exempt from FBT.
If you are unsure and need advice please don’t hesitate to contact us.