With Christmas rapidly approaching, it’s important to understand how your spending could impact your tax responsibilities. From holiday parties and staff gifts to client entertainment, the ATO has specific guidelines on what can and cannot be deducted.
How to make your staff Christmas party tax deductible?
If you hold a Christmas party at the office on a working day, you can avoid fringe benefits tax (FBT) on expenses such as food, drinks, and even taxi travel to or from the event. If the party is held offsite and the cost per person remains under $300, you can also avoid FBT, but you won’t be able to claim GST credits or a tax deduction.
However, if you organise a more lavish offsite party with costs exceeding $300 per person, FBT will apply. In this case, you can claim GST credits and a tax deduction for the event’s expenses.
Are client gift costs deductible?
The deductibility of client gift expenses depends on the type of gift and its intended purpose. If the gifts are given with the expectation of benefiting the business and are considered a marketing expense, they are tax deductible. However, gifts classified as entertainment are not deductible.
Are staff gifts tax deductible?
Staff gifts are tax deductible if they fall below the $300 FBT minor benefit limit and are given as one-off, spontaneous gestures. Avoid giving ongoing gifts, such as gym memberships or multiple gifts to the same person that exceed the $300 threshold, as this will trigger FBT. You can provide gifts throughout the year without triggering Fringe Benefits Tax (FBT), as each gift is considered separately under the minor benefit limit. However, cash bonuses will be treated as income, similar to salary and wages.
Are expenses related to entertaining clients tax deductible?
Whether it’s for Christmas or any other occasion, the costs associated with entertaining clients—such as food, drinks, or entertainment—are not deductible. The Australian Taxation Office (ATO) is focused on ensuring that taxpayers do not end up covering some of the expenses related to long lunches or special events while building relationships with clients.