Like 2020, 2021 has been a difficult year for everyone, defined by lockdowns, uncertainty, and frustration. Going through different waves of covid, motivating oneself to continue work from home, and wondering when the normalcy would back, took all the fun out of 2021. After such a hard time it’s time for some celebration and enjoying some festive vibes in the workplace. But with such great parties, would you not like to save some of the tax implications imposed on such gatherings? This year while holding great Christmas parties don’t forget to note the Fringe Benefits Tax consequences for non-FBT exempt organizations.
After hustling hard throughout the year, everyone deserves a great Christmas. Such gatherings can be a great way to relax and a terrific chance for teams and coworkers to reconnect. The location of the gathering can majorly affect the tax implications. Choosing a location on-site or off-site got its perks.
On-site Christmas party meal entertainment advantages offered to employees are exempt from FBT, despite the price. If a company’s Christmas party will cost $300 or more per person, they should limit the event to staff only and have it on-site during the workday. Unless the exception of the minimal benefits applies, any costs incurred by employees’ associates are subject to FBT. This implies that companies wishing to avoid FBT must keep event costs under $300 per attendee.
In the case of an Off-site Christmas celebration, the exempt property benefit for employees is no longer accessible. The consequence of which is, under the modest perks exception, the employer may spend less than $300 per person (including GST) without paying FBT. This is apt to the employees and their associates as well who attend the event.
Depending on whether the business is organizing a Friday night drinks or a Christmas party on-premises or an off-premises activity where alcohol is consumed, the following Fringe Benefits Tax implications for non-FBT exempt organizations apply will help you enjoy your Christmas party a little more :
– Until FBT is paid, entertainment is normally not tax-deductible.
– On non-deductible entertainment, there are no GST credits available.
– Fringe benefits tax applies to all employee gifts, regardless of their nature. While client gifts are not subject to FBT, they are not all income tax-deductible.
– Refreshments like morning teas, milk, biscuits, and others are not considered as entertainment and are not subjected to FBT, but are tax-deductible.
– Minor fringe benefits are free from FBT, although they cannot be claimed as an income tax deduction.
– If a company hosts a social activity/function on its premises then food, drinks, and travel expenses are free from FBT, Income Tax, and GST claim for both employees and clients.
– If a company hosts a social activity/function off-premises then FBT, Income Tax and GST claim is applicable on food, drinks, and travel expenses for employees but not for clients
Although the tax ramifications of pre-Christmas gatherings and presents can be complicated, there are still numerous methods for businesses to show their best wishes and thanks this holiday season. So, this season, don’t miss the fun due to the fear of paying higher taxes. Use these tips and rock & roll at those Christmas parties. Let’s appreciate the hard work done and the milestones achieved. Merry Christmas!