FBT and tax deduction for staff Christmas parties
Whether a Christmas party attracts Fringe Benefits Tax (FBT) of 47% and if you get a tax deduction depends on where it is held, who attends and how much it costs. Parties held at your business premises during work hours for employees are usually exempt. Offsite parties maybe exempt under the minor benefits rule if the cost is under $300 per person. (but you don’t get the tax deduction of the cost)
Key Rules:
On business premises during work hours:
If only employees attend, food and drink are exempt from FBT.
Offsite parties:
If the cost is under $300 per person (including GST) it is exempt under the minor benefits rule. So avoids 47% FBT Tax, but you miss out on the deduction.
If the cost is over $300 per person, then FBT generally applies. (or it could get moved to owners drawings to avoid this.
Staff Christmas gifts:
Gifts under $300 per employee are usually exempt under the minor benefits rule. But maybe tax deductible if done infrequently
Gifts over $300 may attract FBT.
Cash bonuses:
Treated as salary /wages not gifts
Subject to PAYG withholding and superannuation, not FBT
Client gifts:
Non-entertainment gifts under $300 such as hampers or wine are exempt and tax deductible. Entertainment gifts like concert tickets, meals, event passes usually trigger FBT and are not tax-deductible.
Practical Tips for Employers:
Keep costs below $300 per person to use the minor benefits exemption
Hold the party on business premises during work hours is possible
Separate employee vs client expenses in you records to avoid confusion
Document everything accurate records help if the ATO reviews your FBT obligations