As the holiday season approaches, business owners are looking for ways to thank their employees and supplies for their hard work throughout the year. Whether it’s a Christmas party or team-building activities, understanding how these expenses can impact your taxes is important.
Gift and Entertainment expense guide
Christmas party costs are entertainment expenses. If you’re considering how to celebrate, hosting a large event may not always be the best option. Instead, you might think about giving gifts like vouchers, event tickets, or hampers. These gifts show thoughtfulness and allow for a more personal touch. Keep in mind, though, that if the total value of any gift exceeds $300 per employee per quarter, it will also fall under FBT rules.
100% entertainment
- Christmas bonus – (side note: Employees will be required to pay tax on bonuses)
- Light meals consumed at the office such as afternoon tea
- Gifts or gift hampers that contain non-consumables such as event tickets,
- An event at business premises to celebrate Christmas that promotes business and is open to the public (not just employees)
50% entertainment
- Christmas party and activities such as dinner at a restaurant or activities for employees
- Consumable gifts e.g ham, chocolates and wine
You can provide an employee with up to $300 of gifts and prizes, subsidised or discounted goods and services each quarter, and not pay fringe benefit taxes.
This time of year also presents a great opportunity to give back to charity. Any expenses related to food, gifts, or entertainment donated to charitable organizations are 100% tax-deductible.
There are countless ways to celebrate the festive season, whether through an office party, charitable contributions, or quality time with loved ones. However you choose to mark this special time, we wish you a safe and Merry Christmas!