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Unwrapping the Christmas Tax Facts

When it comes to Christmas there are 3 things that are certain:

  1. The never-ending Christmas present shopping and wrapping
  2. Michael Bublé emerging from his 11 month hibernation to re-promote his Christmas album
  3. Anticipating the work Christmas party to truly start the end of year wind-up

Speaking like a true Grinch… whilst all the fun and festivities are in complete overdrive, there is a serious side to Christmas that is worth considering as a business owner. For instance, the most common question that comes to us at this time of year is “is my Christmas Party tax deductible?” and it isn’t a clean cut yes or no answer.

The clear distinction that you need to establish is if the Christmas party involves “entertainment” or not. For taxation purposes, an event is considered to involve entertainment if:

  • Alcoholic drinks are served at the event, regardless of the venue
  • It is held at a restaurant or café
  • It involves a sporting venue, theatre, cinema or night club

If your Christmas party involves any of the above (that is, the fun stuff), then it is not tax deductible.

For the cost of the entire Christmas party to be tax deductible and to avoid Fringe Benefits Tax (FBT), your Christmas party must be:

  • Held at your business premises
  • Held on a working day
  • Held for current employees, volunteers, customers and suppliers only
  • No Alcohol
  • Only finger food or a light meal
  • No employee associates (ie children or spouses) present

And lastly, it is important to note that the cost overall needs to be less than $300 per person.

Written for you by Keira Borg

Published on November 20, 2018 by Progue

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