I always know when it is time for Christmas – that is the time I am bombarded with questions about the vexing issue of Christmas parties and gifts. Any business owner who has weathered at least one Christmas will know that the Grinches at the ATO have made this area extremely difficult, and unfortunately, as boring as bat excrement.
For anyone contemplating seasonal festivities, the variables which need to be addressed are important issues:
- How much will you spend?
- Who are you going to spend it on?
- Where are you going to spend it?
- What are the implications for income tax, FBT (Fringe Benefits Tax) and GST (you all know what that is, right?)
Here we have a means of calculating the tax implications of a work party:
And here, a means for calculating the tax implications of Christmas gifts:
So, if cost is a major setback to your Christmas festivities, you need to carefully analyse the options for you, as the actual dollar cost can vary significantly depending on your circumstances and the nature of the planned party.
One area that a number of our clients have stumbled on is calculating the cost per head of attendees, when family members are included – the calculation is always in relation to the cost per employee, regardless of how much family they come with – and this is reflected in our table.
For example, if you have a party at a restaurant and invite not only staff, but spouses also, and it costs $350 (including GST) per employee, you can claim a tax deduction, and you can claim the GST. However, the party is considered to be a fringe benefit, and therefore FBT will be payable. So, the actual numbers? For your $350 per employee party, you will pay an extra $336.03 in FBT per employee, taking the total cost to $654.21 (after claiming back the GST) per employee. But, you can claim a tax deduction at 30%, taking your final cost to $457.95 (I can almost hear my fellow accountants reaching for their calculators!)
Compare this to a party at the same place, with the same people, that costs $299 per employee. As there is no FBT payable, no tax deduction available and not GST claimable, the final cost is $299 per employee.
Still confused? Email Allan – allan.j@jandt.com.au with your question, we’d love to hear feedback.
