Wondering if you can claim tax deductions for your staff events? Eg: Christmas party, New Year’s party, company birthday party, etc.
Planning events for the office with a little knowledge of the potential tax deductions you may be able to claim back can make a difference to how you go about it.
Venue tax implications
Fringe Benefits (FBT) tax may or may not apply depending on a couple of things.
If you’re holding any kind of function (eg: Christmas Party) for your current employees and their partners, you can take advantage of the $300 (including GST) minor benefit and exemption rule.
- The party needs to be held on the premises of the business and during a business day. If your costs are below $300 per person, FBT will not be incurred, but you will not be able to claim tax deductions or GST credits.
- However, if your employees receive fringe benefits over $300, then fringe benefits tax (FBT) will apply. This means that if the cost of food and drink consumed by employees and spouses exceeds $300 per person, you will incur and need to pay FBT on the expenses of your employee’s spouse or family members only.
If the party is being held at a restaurant or venue, you will not need to pay FBT if the costs remain under $300, as it is considered a minor benefit. If the costs rise to over $300, you will need to pay FBT for your employees, their spouses and their family.
What about transport?
Like venue implications, the FBT implications for transport to the function are “it depends”.
- Taxis provided to an employee will attract FBT unless the travel is to or from the employee’s place of work.
- If the party is held off-premises and you pay for your employee to travel by taxi to the venue and their home after the event, only the first trip is FBT exempt.
- The second trip may be exempt under the minor benefits exemption if you adopt to vale its meal entertainment on an actual basis.
If you provide transportation to the venue (eg: buses), then these costs will form a part of the total meal entertainment expenditure and be subject to FBT. If the threshold is not breached, it may fall under the minor benefits exemption.
What about meal entertainment?
If your party does not include recreation, you may choose the value of food, drink, associated accommodation or travel as ‘meal entertainment’. This potentially allows you to pay less FBT by claiming meals and drinks consumed in a restaurant/cafe or provided at a social gathering.
The taxable value of the meal entertainment can be made using a 50:50 method, 12-week method or actual method.
- 50:50 method - a 50:50 split where the taxable value is 50% of your total expenditure when providing entertainment to your employees, associates or clients during an FBT year.
- 12-week method - involves tracking the taxable value of each fringe benefit and is based on the percentage of meals and entertainment provided to employees as registered in a log for a 12-week representative period.
- Actual method - best used when the exact number of attendees at most meals and entertainment provided or the total value of all meals and entertainment during the FBT year is based on actual expenditure.
Not sure what you can claim?
Don’t worry, we understand it all and would be happy to help. Get in touch and we’ll help you plan your next staff event so that it works best for tax purposes.