Christmas party, FBT and income tax

The Fringe Benefits Tax (FBT) threshold for minor benefits has increased from $100 to $300, making the traditional work Christmas party mostly exempt from FBT.

Although FBT exempt, there are still income tax consequences relating to the work Christmas party that employers need to be aware of.

Holding the Christmas party on the business premises on a working day is the most tax effective. Expenses including food and drink are exempt from FBT for employees with no dollar limit, but no tax deduction or GST credit can be claimed. However, where employees' families (i.e. associates) also attend and the cost attributable to the associate is $300 or more inclusive of GST, there is FBT only on the associates portion of food and drink, and a tax deduction and GST credit can be claimed on that portion. The cost of clients attending the party are not subject to FBT, but no income tax deduction or GST credit can be claimed on their portion of the cost.

Where the Christmas party is held on the business premises on a working day with only employees and clients attending and only finger food or a light meal and no alcohol is provided, the entire cost is tax deductible and there is no FBT. A GST credit can be claimed on the entire cost.

Christmas parties held off the business premises are exempt from FBT where the cost for the employee and their associate is each less than $300 inclusive of GST (or up to $600 in total) but no tax deduction or GST credit can be claimed. The cost of clients attending the party are not subject to FBT, but no income tax deduction or GST credit can be claimed on their portion of the cost.

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