Keep your Christmas party tax-free

Posted November 22, 2019

Keep your Christmas Party tax-free

A Christmas party is great for workplace morale and shows staff you appreciate their efforts. At Trinity tax accountants Cairns, we know a party can also be surprisingly costly.

Were you aware that Christmas parties held in external venues are not tax deductible because they’re classed as entertainment? You may also have to pay fringe benefits tax (FBT), which applies to benefits other than wages or salary provided by an employer to employees.

These tips, from our tax accountants, will help you keep costs down:

  • Limit cost per head to $300 as infrequent minor benefits provided to employees are tax-free.
  • A party hosted on work premises during business hours is not considered ‘entertainment,’ allowing you to claim deductions.
  • Restricting guests to current employees will ensure the event is FBT-free. If employees bring associates, you can avoid FBT if the cost per guest is under $300, including GST.
  • If the cost for an associate exceeds $300, FBT is payable on the guest’s portion of food and drink only and you can claim a tax deduction and GST.
  • FBT is not applicable to clients attending the party, but these costs can’t be claimed as tax deductions or GST credits.
  • Consider the 50-50 split method whereby an FBT liability of 50% is applied to the total cost of the event, making it tax deductible. The other 50% of costs is not deductible, regardless of whether they apply to employees or guests.

For more information from Trinity tax accountants Cairns, contact our friendly staff now on 07 4041 6188 or admin@trinityaccountants.com.au

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