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Friday, 30 November 2012

Holding a Christmas Party? Watch out for FBT...

With Christmas fast approaching and thoughts turning to Christmas parties and year end celebrations, employers need to remember that the provision of 'meal entertainment' to employees may have FBT implications.

The Tax Office states that 'meal entertainment' includes:
    • The provision of entertainment by way of food and/or drink (e.g. restaurant meals and alcohol); and
    • The provision of accommodation or travel in connection with this entertainment (e.g. taxi fares).
Below is a summary of the tax implications of Christmas functions:

Event
FBT?
Tax Deduction?
Claim GST?
Purchase employee gift costing less than $300
No
Yes
Yes
Purchase employee gift costing more than $300
Yes
Yes
Yes
Party held on premises regardless of cost per head for employee
No
No
No
Party on premises – spouse
Only if benefit is more than $300 per head
Only if benefit is more than $300 per head
Only if benefit is more than $300 per head
Party off premises – employees & spouses
Only if benefit is more than $300 per head
Only if benefit is more than $300 per head
Only if benefit is more than $300 per head
Benefits provided to clients
No
No
No

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