As the festive season approaches, many businesses are busy planning celebrations, gifts, and year-end gestures of appreciation. But with the holiday cheer comes the question of how these expenses impact your taxes. To help you navigate the season, we’ve answered the four most common Christmas tax questions we receive so you can celebrate confidently – without unexpected surprises.
1. How Can I Make the Staff Christmas Party Tax Deductible or Tax-Free?
Not having one is an option, but let’s face it – no one wants to be that boss. You’ll pay tax in one form or another; it’s just a matter of how. If you structure your party to avoid fringe benefits tax (FBT), you usually won’t be able to claim a tax deduction or GST credits. Here’s the detailed breakdown.
No FBT
Host your Christmas party at the office on a workday; chances are FBT won’t apply to food and drinks. Even taxi rides to or from the office can be FBT-free – a handy perk if anyone overindulges in festive cheer.
If you’re hosting outside the office, keeping the cost under $300 per head (the FBT minor benefit limit) will typically mean no FBT. But remember, no FBT also means no tax deductions or GST credits for the party expenses.
Tax Deductible
Planning something a bit more extravagant? If your party costs exceed $300 per person, FBT will apply, but you can claim a tax deduction and GST credits for the event. So, it’s all about finding the right balance for your budget and goals.
2. Are Client Gift Costs Deductible?
That depends on the gift and your intent. If your gift is given with the expectation of benefiting your business – think of it as a marketing expense – it’s deductible. For instance, hampers or branded goodies often tick this box.
However, entertainment gifts, like concert tickets or a fancy dinner, aren’t tax deductible. Keep that distinction in mind to make the most of your Christmas generosity.
3. What About Gifts for Staff? Are They Tax Deductible?
When it comes to presents for your team, spontaneity is key. From a tax perspective, keep gifts under the $300 FBT minor benefit limit. It means no ongoing gym memberships or stacking multiple gifts for the same person that add up to $300 or more. Otherwise, you may be gifting the ATO as well!
If you’d prefer to give a cash bonus, note it’s treated as income, the same as salary or wages, and taxed accordingly.
4. Can I Deduct the Cost of Catching Up with Clients Over Lunch?
Whether it’s Christmas or any other time of the year, the cost of entertaining clients – food, drinks, or other activities – isn’t deductible. The ATO is firm on this: taxpayers won’t be footing the bill for your long lunches, no matter how much bonding or deal-making happens over dessert.
Ready to Plan Your Festive Season?
Whether hosting a Christmas party, shopping for client gifts, or planning year-end bonuses, getting the tax side right can save you headaches later. If you’d like tailored advice or have questions about what’s deductible, reach out to us today. Let’s make this festive season one to remember – for all the right reasons!