Christmas Time and Tax

 

If you are considering Christmas presents for your staff or clients the below table summarises the FBT, income tax and GST consequences:

Type of Gift Gifts to employees and their family Gifts to non-employees (clients, suppliers, contractors, etc)
Non-entertainment gifts

For example:

  • Christmas hamper
  • Bottle of wine or whiskey
  • Gift voucher
  • Bottle of perfume
  • Flowers
  • Pen set
Subject to FBT (unless exempt – e.g. the minor benefit exemption applies) and income tax deductible.

The total cost of a gift must be less than $300 (GST inclusive) and provided infrequently to be an exempt minor benefit.

No FBT applies

Income tax deduction is allowed

GST input tax credit can generally be claimed

Entertainment gifts

For example:

  • Theatre / movie tickets
  • Tickets to a sporting event
  • Holiday accommodation
Subject to FBT (unless exempt – e.g. the minor benefit exemption applies)

The total cost of a gift must be less than $300 (GST inclusive) and provided infrequently to be an exempt benefit.

If the gift is FBT exempt, then no income tax deduction and no GST credit can be claimed.

Not subject to FBT

No income tax deduction can be claimed

GST input tax credits cannot be claimed.

Christmas Parties

If you hold your Christmas Party off premises at a restaurant or similar venue, the following table summarises the FBT, income tax and GST consequences:

If… Then…
Current employees only attend at a cost of less than $300 per head (GST inclusive) For employees – There will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable
Current employees and their family and clients attend at a cost of less than $300 per head (GST inclusive) For employees – There will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable.

For family – There will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable.

For clients – considered entertainment, however, no FBT implications, however there is also no income tax deduction or GST claimable.

Current employees, their family and clients attend at a cost of $300 or more per head (GST inclusive) For employees – taxable fringe benefit arises where the value is $300 or more

For family – taxable fringe benefit arises where the value is $300 or more

For clients – considered entertainment, however, no FBT implications, however, there is also no income tax deduction or GST claimable.

If you hold your Christmas party on the business premises, the following table summarises the FBT, income tax and GST consequences:

If… Then…
Current employees and their family and clients attend at a cost of less than $300 per head (GST inclusive) For employees – There will be no FBT implications as it is an exempt property benefit. There is no tax deduction and no GST claimable

For family – There will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable.

For clients – considered entertainment, however, no FBT implications, but also no income tax deduction or GST claimable.

Current employees, their family and clients attend at a cost of $300 or more per head (GST inclusive) For employees – There will be no FBT implications as it is an exempt property benefit. There is no tax deduction and no GST claimable

For family – taxable fringe benefit arises where the value is $300 or more

For clients – considered entertainment, however, no FBT implications, but also no income tax deduction or GST claimable.

For employers that choose to be more altruistic, Christmas can be a time of charitable giving. While it may be considered unconventional, making a donation can generate goodwill amongst employees, particular where they are given the opportunity to choose their charity. From a tax perspective it is the safest way to ensure that you and your business can claim a deduction for your ‘Christmas charity’ though it is important to make certain the charity is registered to receive donations that are tax deductible.

If you are planning to provide your staff with cash bonuses rather than a gift voucher remember that the cash will be taxed in the same way as wages and salaries; a PAYG withholding obligation will be triggered. The Australian Taxation Office view bonuses as ordinary earnings. This means the cash bonus will be subject to Superannuation Guarantee provisions too (an extra expense).