Christmas Work Expenses

It’s easy to spend too much at Christmas. Just remember that if you are splurging on clients, the expense has to be related to how your business generates income to be a legitimate business expense and therefore deductible.

Entertainment expenses are not an allowable deduction (eg food, drinks, sports tickets, theatre etc.).  Hosting client functions, and inviting clients to lunch or to your Christmas party are also classified as entertainment, and therefore not deductible. In addition GST cannot be claimed on the expense.

For staff, if you really want to avoid tax on your work Christmas party then host it in the office on a work day – that way, it’s likely to be exempt from Fringe Benefits Tax (FBT) regardless of what you spend per person.  corporate-christmas-party

But, if you are hosting a work Christmas party outside of the office, keep expenses under $300 (GST incl.) per employee to stay under the FBT minor benefit exemption threshold. This means, post-Christmas party taxi travel expenses, the cost of the Christmas party itself (including meals, drinks and entertainment etc.,), should all be exempt from FBT as long as the cost is kept below $300 per employee.  But, employers still cannot then claim a deduction for the Christmas expenses or claim GST credits.

Christmas gifts for the team should also be kept to under $300 (GST incl.) to ensure they do not incur FBT. Employers can claim a deduction for ad hoc Christmas gifts as long as they do not relate to entertainment.