Christmas parties at the workplace and tax

Planning a Christmas party and want to know if the cost is deductible or subject to Fringe Benefits Tax? Read on.

In summary, if the party is on your premises and the cost is less than $300 per head, there is no FBT but also no tax deduction.

Below is a copy of the ATO guide at https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/FBT-and-entertainment-for-small-business/?page=9

Christmas party on the work premises
Christmas party held at the workplace: cost is less than $300

A company holds a Christmas lunch on its business premises on a working day. Employees, their partners and clients attend. Food and drink is provided at the party and the company provides taxi travel home from the party. The cost per head is $125.

Is entertainment being provided?

Yes – providing a party for employees, associates and clients is entertainment, because the purpose of the function is for people attending to enjoy themselves.

Employees
Does an exemption apply?

Food and drink: The food or drink provided to employees is exempt from FBT because it is provided and consumed on a working day on the business premises.
Taxi travel: The taxi travel is exempt from FBT because there is a specific FBT exemption for taxi travel provided to an employee directly to or from the workplace.
Income tax and GST credits
The employer could not claim an income tax deduction or GST credits for the food, drink or taxi travel provided for employees, associates or clients.

Associates
Does an exemption apply?

Food, drink and taxi travel: The food, drink and taxi travel provided to the employees’ partners (associates) is exempt from FBT because of the minor benefits exemption.
Clients food drink and taxi travel: There is no FBT on benefits provided to clients
Income tax and GST credits
The employer could not claim an income tax deduction or GST credits for the food, drink or taxi travel provided for employees, associates or clients.