It’s almost that time of year again. It’s silly season, where we allow ourselves to let our hair down a little and indulge in end-of-year festivities. The celebrations may look a little different in 2020 than any other year – and depend on which state in which you live – but the tax implications and rules around the office Christmas party still apply.
At least something is consistent, may we say?
Who’s a Scrooge then?
We know “tax” isn’t the most exciting topic at the end of the year, but if you take a little time to learn some ins and outs of office celebrations with regard to tax, you can rest easy in knowing you’ve covered off the necessities – and you can relax and enjoy!
And so, you’re welcome
The cost of holding a Christmas party is categorised as an “Entertainment” expense. This means that said party is not tax-deductible and may be subject to Fringe Benefits Tax (FBT).
As the organiser/ host of the party, there are a few important things to consider.
Whether you choose to host employees only, or include associates/ clients/ others, has implications for exemptions you can claim. The location of your celebration also matters, as does the cost per head.
What is exempt from FBT?
If your party is held on office premises, within working hours and involves only employees, food and beverage expenses may be exempt from FBT.
On the other hand, if the event is held off-premises, it may still be considered exempt if the cost per person is less than $300. This also extends to associates (non-employees) if the $300 limit also applies to them. This is called a “minor benefit”.
What is not exempt from FBT?
The cost of associates (non-employees) attending the event are not exempt from FBT, unless considered to be a minor benefit.
When it comes to gifts, “entertainment” gifts are also not tax-deductible and may be subject to FBT. As a general rule, it’s most tax-effective to give non-entertainment gifts (such as gift baskets, wine, beauty products) that are under $300 as they are tax-deductible and not subject to FBT.
How can QCA help?
Of course, tax implications are not the only consideration when it comes to planning your office Christmas party! But we think it’s worthwhile being informed about the implications before you plan your event.
If you’re planning an end-of-year get-together – or already had one and would like to discuss the tax implications – get in touch. We’d love to discuss it with you. And don’t forget to invite your accountant
Most of all, enjoy the end of year festivities. It’s been a challenging year for many people and businesses, and letting your hair down a little may be just what the doctor ordered.