Are Christmas Gifts and Christmas Parties Claimable?


Happy New Year! You are most likely open for business again after the Christmas period and before you closed your doors for a long overdue break held a Christmas party for your staff and let them know how much you appreciate all of their hard work with a "Christmas gift". Now it is time to enter the invoices for those transactions but where do you put them? Can I claim GST? Are they tax deductable? What does Fringe Benefits Tax (FBT) have to do with our Christmas party and staff gifts?

The ICB (Institute of Certified Bookkeepers) has included a guide for you to follow when coding those invoices:

Christmas Parties

The boss decides to throw a Christmas party for the staff. Can you claim this as a business expense? Does Fringe Benefits Tax apply? This depends on who attends and where the party is being held. The provision of a Christmas party for an employee may be a minor benefit and exempt from FBT if the cost of the party is less than $300 per employee and certain conditions are met. This provision also applies to the employee's associate (family member) or spouse.

The cost of providing a Christmas party is income tax deductible to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT cannot be claimed as an income tax deduction. GST credits can only be claimed to the extent that a cost is tax deductible. Therefore, if you cannot claim it as a deduction, you cannot claim the GST credits either. The ATO have guidelines in regards to FBT as it relates to different business structures. See the links below for more detail. What can you Claim

Minor Benefits Exemption The $300 threshold is applied separately to each benefit, gift or party. So for example, an employee could attend the workplace party at a cost to the employer of $280 and receive a gift worth $250, but because these amounts are treated separately there are no FBT implications. The minor benefit exemption does NOT apply to any party other than employees. Therefore if a non-entertainment gift is given to a client or supplier this can be deductible expense and therefore GST can be claimed.

Christmas Gifts for your Employees

1. For gifts such as wine, food, hampers, vouchers, etc., these are not considered to be entertainment.

• If the gift is a minor benefit (i.e., less than $300 value), then the gift is NOT tax deductible, and therefore

GST is not claimable for gifts to employees and their family members, clients and suppliers. No FBT applies to gifts of less than $300. • For gifts over $300, FBT may apply for employees and their family members.

2. Gifts such as a holiday, membership to a club, or tickets to a theatre, sporting or musical event are considered to be entertainment.

• For minor benefits, as above, the gift is not tax deductible and no FBT applies. • For employees this is not a minor benefit, the gift is tax deductible but it is also subject to FBT. Christmas Gifts for your Clients and Suppliers Are gifts to your clients and suppliers claimable?

Gifts may be classified as “entertainment” or "non-entertainment".

1. For gifts such as wine, food, hampers, vouchers, etc., these are not considered to be entertainment.

• Non-entertainment gifts to clients or suppliers are deductible and GST is claimable.

2. Gifts such as a holiday, membership to a club, or tickets to a theatre, sporting or musical event are considered to be entertainment.

• For clients and suppliers, the entertainment gift is NOT tax deductible, and no FBT applies, no GST is claimable.

Giving your clients a gift at Christmas is a personal choice that you as the business owner can make. Be aware that some clients may not be allowed to accept gifts due to their business’s Code of Conduct (e.g., government workers). . We remind you that the topic of entertainment, tax deductibility and fringe benefits tax is complex and not always straightforward. Check with your tax agent if in doubt and refer to the ATO website for detailed guidance.

To read the full ICB December eBrief visit:

These expenses are very often coded incorrectly and I even find I have to refer to information from the ATO to refresh my memory!!

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