Christmas parties are a great time to strengthen your connection with your staff, clients, and suppliers. Unfortunately, there’s no good news on the tax consequences of these events. 

Christmas parties are treated as “Entertainment” and generally not tax-deductible.  For Christmas parties held on premises, where only employees attend, all costs are not deductible, and no GST credits are available. However, the costs are exempt from FBT.

Where Christmas parties are held off-premises, if the spend per employee is under $300 per head, it is exempt from FBT (it is considered a minor benefit).  However, it is not tax-deductible and you cannot claim GST credits. 

Above $300 per head, it is subject to FBT, and you can claim a tax deduction and the GST credits. This scenario does sound favourable; however, the FBT applicable is approximately the same amount as the tax saved on the deduction and the GST credit you have claimed.

Any expenses related to your clients attending your Christmas party are not tax-deductible, nor can you claim GST credits. However, they are exempt from FBT.

The moral of the story? Have a fun Christmas party with staff and clients!  Don’t focus on the tax consequences; just be aware of them.

What are you doing for your Christmas party?