Our Guide to FBT on Festive Season Spending

The festive season is a time for personal and professional celebrations, with many companies showing appreciation for employees and clients. Many businesses throw Christmas parties, host celebratory meals, or give gifts to celebrate the festive season with those who have contributed to their success.

However, these seasonal gestures may come with tax implications that need to be considered, including Fringe Benefits Tax (FBT), tax deductibility, and GST. Discover how these relate to seasonal parties and gift-giving below with our quick reference guide. 

Throwing a Christmas Party

A festive celebration is a mainstay of the Christmas season. However, where, when, and how you celebrate will determine whether there is tax implications attached to your party.

On-Site Parties

Keeping it in-house? Hosting a Christmas party on the business premises during a workday can provide significant FBT advantages.

FBT Exemption: Meal and entertainment benefits provided to employees during an on-site event are exempt from FBT, regardless of cost.

Associates: If associates (e.g., family members) attend, their costs are subject to FBT unless the minor benefits exemption applies and expenses are under $300 per person, including GST.

Clients: Client meal and entertainment benefits are not subject to FBT. They are also not tax-deductible or GST-creditable.

Off-Site Parties

When a Christmas party is held off-site, the tax implications differ depending on the amount spent per person.

Minor Benefits Exemption: Costs under $300 per person (including GST) for employees and associates may be exempt from FBT.

FBT Liability: Costs exceeding $300 per person are subject to FBT.

Clients: Client expenses remain not subject to FBT nor tax-deductible or GST-creditable.

Transport Costs

Travel to and from the Christmas party can also attract FBT in certain circumstances.

On-Site Events: Transporting employees to a workplace party on a company-owned worksite is FBT-exempt.

Off-Site Events: FBT may apply unless the transport fee falls under the minor benefits exemption and totals under $300 per person.

Associates: Transport costs for associates are subject to FBT, regardless of location or cost.

Christmas Gifts

The tax treatment of gifts depends on who they are for, their cost and the nature of the gift. Gifts given to clients are generally not subject to FBT, but tax deductibility depends on the type of gift.

Employee Non-Entertainment Gifts (e.g. hampers and gift cards): This gift type is subject to FBT for employees unless the minor benefits exemption applies for gifts under $300. It is also tax-deductible and GST-creditable when the minor benefits exemption does not apply.

Client Non-Entertainment Gifts: Client gifts are tax-deductible and GST-creditable, provided they are business-related.

Employee Entertainment Gifts (e.g., movie or sports tickets): Entertainment gifts are subject to FBT unless the minor benefits exemption applies. They are only tax-deductible and GST-creditable if not exempt under the minor benefits exemption.

Client Entertainment Gifts: These are not subject to FBT, are not tax-deductible or GST-creditable for clients

Planning Your Company Festive Season

Careful planning of your company's seasonal celebrations and gift-giving can help maximise FBT exemptions and minimise tax liabilities. By navigating these nuances carefully, companies can celebrate the festive season cost-effectively while maintaining tax compliance. Contact the Ascent Accountants team for further guidance on reducing your festive FBT liability or advice on your unique circumstances.