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Christmas Parties and the Tax Man!

With the end of the year fast approaching, many employees will be providing Christmas parties for staff
and clients.  What may appear a clear business expense to you, is not necessarily viewed in the same
light by the Tax Man!

Christmas parties can impact 3 areas of taxation :

Income Tax - Are Christmas parties deductible?
Fringe Benefits Tax - Does Fringe Benefits Tax apply?
Goods and Services Tax - Can you claim a credit for GST paid?

The answers to these questions depend on many factors, including whether the function is held on the
employer's premises, and whether the employee's spouse or clients attend.

Below we have prepared a table which briefly summaries the taxation treatment.

FBT?         Tax Deduction? Input Tax Credit?

FBT Minor   &
Infrequent Exemption?

Party on the employer's premises on a working day :
Employees

No

Yes

Yes

Yes

Employee's spouse Yes Yes Yes Yes
Clients No No No n/a
Party held away from the employer's premises:
Employees Yes Yes Yes Yes
Employee's spouse Yes Yes Yes Yes
Clients No No No No

Note: If the 50/50 split method is being used, no FBT exemption will be available.
           50% of all meal entertainment is subject to FBT, with 50% deductible and
          50% of the input tax credits available.


Investment Allowance ends this month!

Don't forget the government investment allowance ends 31 December 2009!

The investment allowance only applies to the purchase of new tangible depreciable assets acquired
before 31 December 2009.

The amount of the investment allowance available depends on whether or not you are categorised as a
small business.  To be eligible as a "small business" the combined turnover or your entity and any
"associated" entities needs to be less than $2,000,000.

The following table summaries the remaining allownces available:

Small Business
(<$2m turnover)
Non-Small Business
(>$2m turnover)
Asset acquired by: 31 December 2009 31 December 2009
Installed By: 31 December 2010 31 December 2010
Allowance Rate: 50% 10%
Required investment: $1,000 or more $10,000 or more

The cost of items forming part of a set and the cost of identical or substantially identical assets may be
added together for the purpose of meeting the thresholds.

All assets must be used principally for the purpose of carrying on a business and meet certain eligibility
criteria.