Want to hold your Christmas party away from work? You might need to understand the tax consequences of such action to make sure there are no unforeseen tax problems.

The costs associated with Christmas parties held off your business premises (for example, a restaurant) will give rise to a taxable fringe benefit for employees and their associates unless the benefits are exempt minor benefits.

Example

Another company decides to hold its Christmas function at a restaurant on a working day before Christmas and provides meals, drinks and entertainment.

If…

Then…

current employees only attend at a cost of $195 per head

there are no FBT implications as the minor benefits exemption applies.*

current employees and their associates attend at a cost of $180 per head

there are no FBT implications as the minor benefits exemption applies.*

current employees, their associates and clients attend at a cost of $365 per head

·          for employees – a taxable fringe benefit will arise

·          for associates – a taxable fringe benefit will arise, and

·          for clients – there is no FBT payable and the cost of providing the entertainment is not income tax deductible.

 

* Where the benefits are indicated as qualifying for the minor benefits exemption, it is on the basis that the necessary conditions have been satisfied.

If you would like further assistance about this matter, call us on (02) 4732 3844. We will be happy to assist.