Are you planning any Christmas celebrations for your staff and/or business associates?
Best to refresh your memory on the allowable deductions and FBT rules, before the event, so you don’t end up with any surprise tax to pay!
The following information is courtesy of the Australian Bookkeepers Network:
Christmas Parties
Instead of (or as well as) gifts, it’s quite common for employers to host a Christmas Party for their staff (often including spouses) at a restaurant.
Where this is the case, the total cost will generally be exempt from FBT provided the per-head cost (dinner and drinks) is kept to under $300 per person. This is known as the Minor Benefits Exemption. The downside of using the Minor Benefit Exemption is that the meal entertainment is not tax deductible, and nor can you claim a GST credit. To enjoy this exemption the employer must use the Actual Method for valuing FBT meal entertainment. The Actual Method is the default method for valuing meal entertainment, and no formal ATO election is required to use this method. Under the Actual Method, an employer pays FBT (in the absence of an exemption) on all taxable meal entertainment provided to employees and their associates such as spouses.
The take-home message is that if like many employers the only social functions you host for employees during the year are a Christmas Party (and perhaps the Melbourne Cup), be conscious of keeping the per-head cost under $300. By doing so, you may be able to exempt the entire cost of the party from FBT.
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