Every year businesses want to reward employees and celebrate the end of another year, but how do you celebrate?
There are many factors that come into play in the consideration of treatment of various expenses.
For some early birds they may have held their Christmas party at the Spring Racing Carnival in a function room or marquee. Was this expense under the $300 GST Inclusive threshold per employee and their partner? If it was then it would be considered a minor benefit. A minor benefit is an exemption that applies for the Fringe Benefits Tax which is known as FBT, but it is common practice for this type of entertainment to not have the GST claimed and to not be a deductible expense.
Another common Christmas breakup is a BBQ, this is often held on the business premises, in this scenario all the food and soft drink expenses are considered a claimable deduction.
Some important aspects that you need to consider when planning a business christmas party are:
- Are you having a party with alcohol at a restaurant?
- Are you having food and alcohol at your premises?
- How much are you going to spend per employee?
- Are there going to be suppliers and contractors at the party?
These questions will help determine if an expense and GST is claimable or not.
Giving gifts to staff under $300 GST inclusive is a great option as the GST is claimable and the expense can be claimed. It is considered as a minor benefit and FBT is not applicable.
If you give tickets to the theatre, movies or a sporting event it is considered entertainment. It is also considered a minor benefit for FBT if under the threshold. The GST is not claimable and the expense cannot be claimed. On the other hand if the entertainment expense is over $300 GST inclusive per employee then the expense is subject to FBT, the GST can be claimed and it is considered a tax deduction.
Client gifts are fully claimable as an expense as well as GST claimable, but remember if the expense is considered an entertainment expense (eg. theatre tickets) it is not claimable.
Typical gifts that would not be considered an entertainment expense are a bottle of wine, hampers, flowers, perfumes and gift vouchers. A frequent error made by many is that they try to claim the GST on gift vouchers when there is no GST to claim.
The best thing you can do is give as much detail as you can when entering the expense in your accounting package so then your BAS Agent or accountant can help you.
At the end of the day if you are unsure about how to treat these expenses contact your advisor who can help you.
If you do not have an advisor and require some assistance please contact us to arrange a consultation.
*Please Note: The information contained in this blog is of a generic nature for small businesses in Australia and should not be used as a sole source of information. If you require specific advice please contact your advisor.