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