Christmas is expensive. Some businesses simply can’t afford to do much because cashflow is too tight. Expectations are high so if you
are doing something then it’s best not to exacerbate cashflow problems and take advantage of any tax benefits or concessions you can.
If you really want to avoid tax on your work Christmas party then host it in the office on a workday. This
way, Fringe Benefits Tax (FBT) is unlikely to apply regardless of how much you spend per person.
Also, taxi travel that starts or finishes at an employee’s place of work is exempt from FBT. So, if you have a few team members
that need to be loaded into a taxi after over indulging in Christmas cheer, the ride home is exempt from FBT.
If your work Christmas party is out of the office, keep the cost of your celebrations below $300 per person if you want to avoid
paying FBT. The downside is that the business cannot claim deductions or GST credits for the expenses if there is no FBT payable
in relation to the party.
If the party is held somewhere other than your business premises, then the taxi travel is taken to be a separate benefit from the
party itself and any Christmas gifts you have provided. In theory, this means that if the cost of each item per person is below $300
then the gift, party and taxi travel can potentially all be FBT-free.
Just remember that the minor benefits exemption requires a number of factors to be considered, including the
total value of associated benefits provided across the FBT year. If entertainment is provided to employees and an FBT exemption
applies, you will not be able to claim tax deductions or GST credits for the expenses.
If your business hosts slightly more extravagant parties and goes above the $300 per person minor benefit limit, you will pay FBT but
you can also claim a tax deduction and GST credits for the cost of the event. Just bear in mind that deductions are only useful
to offset against tax. If your business is paying no or limited amounts of tax, a tax deduction is not going to help offset the cost
of the party.
Christmas gifts for staff
$300 is the minor benefit threshold for FBT so anything at or above this level will mean that your Christmas generosity will result in a
gift to the Tax Office as well at a rate of 47%. To qualify as a minor benefit, gifts also have to be ad hoc - no monthly gym memberships or
giving one person multiple gift vouchers amounting to $300 or more.
Gifts of cash from the business are treated as salary and wages – PAYG withholding is triggered and the amount is subject to the
Aside from the tax issues, think about what will be of value to your team. The most appreciated gift is the
one that means something to the individual. Giving a bottle of wine to someone who doesn’t drink, chocolates to a health
fanatic, or time off to someone with excess leave, isn’t going to garner much in the way of goodwill.
A sincere personal message will often have a greater impact than a standard gift.