Christmas party: Examples from the ATO

EXAMPLE 1

A small manufacturing company decides to have a party on its business premises on a working day before Christmas. The company provides food, beer and wine.

The implications for the employer in this situation would be as follows.

If… Then…
current employees only attend there are no FBT implications as it is an exempt property benefit.
current employees and their associates attend at a cost of $180 per head

• for employees – there are no FBT implications as
it is an exempt property benefit, and the minor benefit exemption could also apply, and

• for associates – there are no FBT implications as the minor benefit exemption applies.

current employees, their associates and some clients attend at a cost of $365 per head

• for employees – there are no FBT implications as
it is an exempt property benefit

• for associates – a taxable fringe benefit will arise as the value is equal to or more than $300, and

• for clients – there is no FBT payable and no income tax deduction.

EXAMPLE 2

Another company decides to hold its Christmas party function at a restaurant on a working day before Christmas and provides meals, drinks and entertainment.

The implications for the employer in this situation would be as follows.

If… Then…
current employees only attend at a cost of $195 per head there are no FBT implications as the minor benefits exemption applies.
current employees and their associates attend at a cost of $180 per head there are no FBT implications as the minor benefits exemption applies.
current employees, their associates and clients attend at a cost of $365 per head • for employees – a taxable fringe benefit will arise • for associates – a taxable fringe benefit will arise, and • for clients – there is no FBT payable and the cost of providing the entertainment is not income tax deductible.
  1. Minor benefit exemption must be less than $300 per benefit, provided on an irregular and infrequent basis, and satisfy other relevant conditions.
  2. Income tax treatment for entertainment expenses determined under tax law.
  3. An associate of an employee is widely defined. It normally includes family members.

NOTE. This flowchart does not apply if you use the 50/50 split or 12 week register in calculating FBT for meal entertainment.

Christmas party: Examples from the ATO

This is a complex area of tax law, so please contact us for further guidance.

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