Christmas Gifts and Parties and Tax

This is a complicated area that affects: 1. Being able to claim an income tax deduction, 2. Able to claim the Goods and Services Tax (GST) on the expense, 3. Pay Fringe Benefits Tax (FBT 46.5%) on the item.

Gifts 

If the gift to employees and family members is under $300 is for non-entertainment item, eg gift certificate and hampers, you are able to claim a tax deduction, GST and no FBT payable. FBT will apply if over $300. If the gift is to clients or suppliers then you are able to claim a tax and GST deduction, with no FBT payable.  

For entertainment expenses such as theatre and movie tickets, then for employees etc if under $300, no tax or GST deduction and no FBT. If over $300 then tax deductible and FBT applies. For clients then no tax\GST deduction, however no FBT.      

Christmas Parties 

If you are not claiming FBT under the 50/50 rule, which is the most common method then the following rules apply.   If the party is under $300 per head then no FBT is payable, however you are unable to claim GST or the expense as a tax deduction.  If over $300 per head then FBT payable, however you are able to claim tax deduction.    

Summary 

This is a complicated area and you would need to check the details of the item before you claim the expense.