Common entertainment scenarios for business
How FBT applies to businesses for Christmas parties
If your business holds a Christmas party:
- on a working day, on your business premises, and only for your current employees, you don’t pay fringe benefits tax (FBT) for the food and drink
- off your business premises, or the party includes associates of employees (such as their partners), you don’t pay FBT if the party is a minor benefit – that is, the cost for each person is less than $300 and it would be considered unreasonable to treat it as a fringe benefit
- that includes clients, you don’t pay FBT for the costs relating to the clients.
If you give your employees a Christmas gift, you don’t pay FBT if the value of the gift is less than $300 per person and it would be considered unreasonable to treat it as a fringe benefit.
If the Christmas party is not subject to FBT, you can’t claim income tax deductions for the cost of the party.
Example: Christmas party on business premises
A company holds a Christmas lunch on its business premises on a working day.
- Employees, their partners and clients attend.
- The company provides food and drink, and taxi travel home.
- The cost per head is $125.
Entertainment is being provided
A party for employees, associates and clients is entertainment because the purpose of the function is for the people attending to enjoy themselves.
Employees – no FBT, exemption applies
The employer doesn’t pay FBT for the:
- food and drink for employees, because it is provided and consumed on a working day on the business premises
- taxi travel, because there is a specific FBT exemption for taxi travel directly to or from the workplace.
Associates – no FBT, exemption applies
The employer doesn’t pay FBT for the food, drink and taxi travel provided to the employees’ partners (associates), because it is a minor benefit – that is, it has a value of less than $300 and it would be unreasonable to treat it as a fringe benefit.
Clients – no FBT
There is no FBT on benefits provided to clients.
Income tax and GST credits
The employer can’t claim an income tax deduction or GST credits for the food, drink or taxi travel provided for employees, associates or clients.
Contact Omnis Group’s Business Accountants if you need help planning your end-of-year business activities around FBT.
Omnis Group are modern, forward-thinking Business Accountants in West Perth, providing practical, proactive, real-world advice and support that goes beyond the basic preparation and lodgement of tax returns, to identify opportunities for improvement in your business.
Source: ATO