Christmastime means a few things: the stress of December deadlines, parties, presents, and a dash (or a keg) of booze. Small business owners can make the mistake of assuming that most, if not all of the above is tax deductible. If you play your cards right then a lot of it can be, but there are a two main considerations to keep in mind when planning for your Christmas celebrations.
$300 is the magic number
When it comes to Christmas gifting for you team, some people love to be generous. For others, a small token or an awesome party is more than enough. However you plan to do it, keep your gifting cost at under $300 per person. At this amount, it’s considered a minor benefit and is therefore not subject to Fringe Benefit Tax (FBT).
Are you entertaining?
As counter-intuitive as it might sound, anything deemed entertainment isn’t deductible (classic from the tax office). This is true for both Christmas parties and presents. There are some ways to get around it though. For example, a voucher for Luna Park wouldn’t be considered entertainment, however an entry pass would be.
- Clothes or footwear
- Skincare or beauty products
Entertainment in general is an experience based gift or party. So tickets are pretty much out of the question and you want your party to be deductible, there are criteria it has to meet so it stays firmly in the “non-entertainment” category:
- It must be on your business premises, within working hours
- Employees, clients and suppliers are on the invite list but anyone outside of this miss out (including partners)
- Alcohol isn’t deductible when served at a party however if you’re gifting a sealed bottle, then it is
- A light meal can be supplied however a full meal is entertainment
If you ask us, take the above into consideration but don’t let that get in the way of a great time for you and your team. Everyone has worked hard this year and throwing a great party is such a nice way of recognising that and showing your appreciation as the business owner.
Keep in mind that these are guidelines, and as with anything FBT related, there are lots of minute ins-and-outs around these kind of deductions. As always, get in touch with any questions and feel free to fill us in on exactly what your plans are. We can let you know beforehand what the tax implications will be!