Christmas is such a giving time of the year and many of my clients choose to provide their staff with a christmas gift or celebrate with a christmas party of both. While very generous, there are some GST and tax implications that you should be aware of when deciding how to celebrate the season with your employees.
Christmas parties generally fall under the fringe benefits legislation but there’s a minor benefits exemption. The minor benefits exemption allows for a cost of $300 or less to be spent on employees as long as the expense is infrequent or irregular. So in basic terms, you can spend this amount without having to worry about fringe benefits tax. The $300 limit is per employee but includes their spouse/kids etc. Be aware that no tax deduction or GST can be claimed. If you have customers/clients attend your party, there is no fringe benefits to consider however there is no also ability to claim the GST or a tax deduction.
If you choose to give a gift that is less than $300 including GST (and it’s not part of the christmas party) this can be categorised as a non entertainment gift. It is tax deductible and the GST can be claimed as per usual. Examples of this are gift vouchers, alcohol, hampers etc. However, be careful not to confuse gifts of accommodation or movie tickets as these are classified as entertainment gifts and there is no tax deduction allowed and no GST can be claimed if the gift is under $300. If the gift is over $300 then fringe benefits tax is payable (and you need to lodge an additional return) but a tax deduction is allowed.
From a client or customer perspective, generally a tax deduction and GST can be claimed as long as the gifts are not excessive.
So please keep in mind – fringe benefits tax, GST and the tax deductibility during this festive time. I know it takes the edge of the spirit of the season but better to be informed.
Our office will be closed on Wednesday December 19th and will re-open on Monday January 7th, 2012.