As you have been tirelessly planning your company's Christmas party, have you also been trying to figure out the tax implications? While finding a great venue and a DJ to perform might be enough for most guests, you're still responsible for ensuring that your company's party is within the guidelines of ATO tax laws. 

The $300 Minor Benefits Rule 

FBT is charged on any taxable benefit provided to an employee in excess of $300 per year, where that benefit is not specifically exempt. The $300 minor benefits rule also applies to Christmas parties. However, the ATO provides an exemption if you have a ‘reasonable’ estimate of how much the benefit will cost per person and it is not more than $300. The estimated cost must be reasonable and based on past experience or similar events. 
Note that if it falls under the FBT exempt amount, it is exempt from FBT BUT will also be not tax deductible and no GST can be claimed on the payments.

Business Christmas party held on-site during a workday 

If your Christmas party is held on-site during business hours, you will not have to pay FBT. However, if the party is held off-site or after hours, you may need to pay FBT.   Christmas-themed Morning Tea, anyone? So long as it's finger foods and no alcohol, then it's tax deductible and FBT free.

Off-site Christmas celebration 

The ATO considers a Christmas party held off-premises to be a ‘benefit’, so FBT is charged on any taxable benefit provided to an employee in excess of $300 per year. This also applies if you provide food and/or drink at an event that is not considered a work-related function. If the cost of the food and drink provided at a Christmas party exceeds $300, FBT must be paid for this excess amount.  Where there is FBT applicable, it is tax deductible, and you can claim the GST paid on costs too.

Meal Entertainment 

The ATO requires that a meal be reasonable in cost and that the value of entertainment not exceed 50% of total meal costs. You may claim an expense deduction for any FBT, provided it is held on the same occasion as a work-related function. 

So if you are planning a Christmas party this year, take advantage of the ATO's guidelines and ensure that your expense is tax deductible. If you would like advice on how to plan your Christmas party, please do not hesitate to contact us.