As the end of the year approaches, you may be looking for a way to thank your hard-working employees for their work during this past year. The tax deductions you could claim back on your giving could make it even sweeter.
If you plan to hold a Christmas party or function, or are looking to give work gifts, you may be able to claim tax back.
If you don’t hold a function, but give your employees some sort of entertainment (like a voucher), you may need to pay FBT. Generally, you can claim 50% of your party expenses in your GST and income tax returns, and 100% of the cost of gifts back.
If you give your employees a gift, you can claim the full cost as an expense as long as it doesn’t fall within the business entertainment rules, but you may have to pay FBT. If your FBT returns are filed quarterly, there is a $300 exemption per employee per quarter if you provide free goods or subsidised or discounted goods and services. If the value of the benefit for an employee goes over $300 per quarter, FBT must be paid on the full value of the benefit.
If you provide your employees, clients and suppliers, or prospective clients and suppliers with any of the following items, you can only deduct 50% of the cost because they’re counted as ‘entertainment expenditure’.
Entertainment expenses that are 50% deductible include:
- Corporate boxes, corporate marquees or tents and similar exclusive areas
- Accommodation in a holiday home, time-share apartment or similar.
- Pleasure – crafts such as a corporate yacht
- Food and drink provided or consumed
- At any of the three types of entertainment above, such as alcohol and food provided in a corporate box.
- Away from the taxpayer’s place of business.
- On the taxpayer’s business premises at a party, reception, celebration meal or other similar social function.
- At any event or function on or away from your business premises to build staff morale or goodwill, such as Friday drinks at the pub.
- In an area of the business premises reserved for use by senior staff, such as the executive dining room for entertaining clients.
If you would like to know more about FBT during the holiday season, you can start a conversation with us today.
