Christmas is a great time to acknowledge and reward your employees  and other associates by celebrating and giving gifts. But don’t get  caught out by entertainment rules! Claiming entertainment and gifts as  business expenses is not always straight-forward, as there are  implications for GST, income tax and fringe benefits tax (FBT).

Is it Entertainment?

Entertainment is generally not a deductible business expense.  Entertainment rules can be tricky, but in general, the more lavish the  meal or event, the more costly, the later in the day and if alcohol is  involved then it will generally be called entertainment.

Fringe benefits tax may apply to entertainment benefits provided to  employees, and if an event or gift is considered to be entertainment  then you cannot claim a business deduction or GST.

A Christmas party for employees, spouses, suppliers and customers may  or may not be classed as entertainment. Check with us to see if any of  the party costs can be claimed.

Keep it Free From FBT

• If you give gifts to your employees keep them under $300 each.  Benefits provided which have a value of less than $300 are exempt from  FBT.
• Give gifts to employees that they otherwise would have claimed as a  tax deduction. For example, you could pay for a professional development  course or give new tools.
• Give gift cards or vouchers up to the value of $300. (Vouchers are not considered to be entertainment).
• Avoid giving ‘entertainment’ gifts over $300, such as membership to clubs, tickets to events or travel.
• Pay a Christmas bonus. Process through payroll like any other wage  payment and withhold tax. Remember that superannuation applies to bonus  wages.

Enjoy the Party

If in doubt, we can help. Once you understand any implications for  GST, income tax and fringe benefits tax (FBT) of throwing an event,  giving gifts and bonuses, you can put your feet up and enjoy the party!!