Christmas parties and gifts: are they tax-deductible?

by | Dec 10, 2021 | 0 comments

A Very Merry Tax-Deductible Christmas

As soon as December rolls around and the Christmas trees come out, you already know the silly season is upon us *cue festivities by the dozen*.

Contrary to popular belief, there are a lot of things you can’t ‘claim’ when it comes to celebrations over the festive season.

Yep, we hate to be the bearer of bad news, but the ATO doesn’t take a holiday over Christmas.

Speaking of the ATO, they’re also not huge fans of claiming ‘entertainment’ as a business expense. So, when Christmas time arrives, it can be tricky trying to figure out what you can and can’t claim.

To help you better understand the world of tax deductions, we’ve broken it down for all you small business owners out there.

Merry Tax Deductions!

Christmas parties
• No tax deduction as it is considered as entertainment
• Fringe benefits tax (FBT) will arise if the cost per person is more than $300
• No FBT for spouses due to the minor benefits exemption

Transport
• Will attract FBT unless the travel is to or from your employees’ place of work

Meal entertainment
• No tax deduction as it is considered as entertainment
• If you host a party at your work premises, FBT doesn’t apply, whatever the cost
• If you host a function off-premises and the cost is under $300 per head, then you cannot claim a deduction for tax, nor the GST credits – FBT will not apply

Employee & Client gifts
Non-entertainment
• Fully tax-deductible & GST claim
• FBT will arise if the total cost of the gift is above $300
• The minor benefits exemption is also applicable to a spouse or partner of the employee

Entertainment (think theatre, sporting events, etc)
• Not tax deductible and GST credits cannot be claimed unless they are $300+ each
• If they are over $300 then the gift becomes tax-deductible, but FBT applies

If you have any questions about tax deductions, contact IM Business Solutions in Perth today.

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