Feeling particularly festive this year and hoping to hold an office Christmas party or perhaps reward your staff for a year of hard work and toil?
Here are our top tax Christmas related issues:

Staff Gifts

Gifts below $300 are a tax deductible expense providing they are classified as a ‘non-entertainment’ gift. The same rule applies for other special occasions such as birthdays. As long as these gifts are ‘infrequent’, you can claim a tax deduction for amounts of less than $300 for employees and there is no FBT. Gifts of $300 or more will be subject to FBT but will still be deductible.

If your gift giving extends to your clients and suppliers, the gifts should still be tax deductible however the $300 limit does not apply.

When planning a deductible gift it is important that the gift meets the ‘non-entertainment’ classification. Gifts such as a bottle of alcohol, gift vouchers, hampers, flowers, groceries, games, beauty products and computers all fit the ‘non entertainment’ classification.

Gifts that are considered ‘entertainment’ and therefore not deductible include movie or sporting event tickets, holidays including accommodation and tickets to amusement parks.

If you are planning to provide staff with a cash bonus rather than a gift voucher or other item of property, then this will be taxed in much the same way as salary and wages.

Client Gifts

If the gift you provide to a client is given for relationship building with the expectation that the client will keep giving you work, then the gift is generally tax deductible as long as it doesn’t involve entertainment.

Unfortunately entertaining your clients at Christmas is not tax deductible. Wining and dining, or any other form of entertainment, can’t be claimed as a deductible business expense and you won’t be able to claim the GST credits either.

Charitable gift giving – will my donation be tax deductible?

For a donation to be tax deductible, it must be made to an organisation endorsed as a deductible gift recipient (DGR).

It must also be a genuine gift – you cannot receive any benefit from the donation. This means that purchases from a charity, such as raffle tickets, items or food cannot be claimed as tax deductible gifts.

The Australian Taxation Office (ATO) endorses organisations as deductible gift recipients.

It is important to remember that not all charities are DGR-endorsed, and there are specific requirements that charities must meet to be endorsed as a deductible gift recipient.

To find out if a charity has DGR endorsement, visit the ACNC Charity Register and search for its name.

The staff Christmas Party

You might avoid Fringe Benefits Tax issues on your work Christmas Party by hosting it in your office on a work day. This way, Fringe Benefits Tax is unlikely to apply regardless of how much you spend per person. Taxi travel that starts or finishes at an employee’s place of work is also exempt from FBT, which can be handy if you like to celebrate the Christmas break up with extra cheer!

If you plan to throw your work Christmas party out of the office this year, work on keeping the cost of your celebrations below $300 per person. Any amount below $300 per person is a minor benefit and generally exempt from FBT (Fringe Benefits Tax). This means that if the cost of each item per person is below $300 then the gift, party and taxi travel can all be FBT free. However, the total cost of all benefits provided to the employees needs to be considered in determining whether the benefits are minor.

The trade-off to this is that if the costs associated with hosting the party are not subject to FBT then it would be difficult to claim a tax deduction or GST credits for the expenses.

If your business hosts more generous parties and goes above the $300 per person minor benefit limit, you will generally pay FBT but you can also claim a tax deduction and GST credits for the cost of the event.

Points to consider

• Christmas parties cannot be claimed as an income tax deduction
• Gifts to employees and clients should fall below $300 to be considered a minor benefits exemption
• FBT will be attracted to your businesses payable tax based on the venue for your Christmas party
• FBT will be attracted on your Christmas party based on the day of the week you hold your party on
• If your gift is given to your employee or client at your Christmas party, the cost of the gift and per head cost of the party can be calculated separately to determine if they fall under $300 in value

Disclaimer: This article contains general information only. Regrettably, no responsibility can be accepted for errors, omissions or possible misleading statements or for any action taken as a result of any material in this guide. It is not designed to be a substitute for professional advice, as such a brief guide cannot hope to cover all circumstances and conditions applying to the law as it relates to these items.