Tax consequences of Christmas parties and gifts

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Tax consequences of Christmas parties and gifts

Category : Financial Advice

Tax consequences of Christmas parties and gifts

Merry Christmas,

Thought I’d give you the following gift – everything you need to know about the tax consequences of Christmas parties and gifts.

Gifts to customers, suppliers and their associates

Gifts such as hampers, beer, wine, spirits, food, flowers, perfume, pens, typical promo and marketing gifts (coolers, bags, BBQ sets) and gift vouchers (generally) are deductible and the GST is claimable. These items are generally coded to ‘Advertising and promotion’ or ‘Donations and gifts’.

Entertainment gifts to customers, suppliers and their associates

Tickets to football games, movies, theatre/live performances, theme / amusement parks, circuses and airlines are non-deductible, and the GST isn’t claimable. These items are generally coded to ‘Entertainment – Non-deductible’.

Entertainment and gifts to employees and their associates < $300

All the above items for employees and their associates, where per item per person, the cost is less than $300 (in total), the expenses are non-deductible, and the GST isn’t claimable. In most cases the food is less than $300 and the drink is less than $300 per person. These items are generally coded to ‘Entertainment – Non-deductible’.

Entertainment and gifts to employees and their associates > $300

All the above items for employees and their associates, where per item per person, the cost is greater than $300, the expenses are tax deductible and the GST is claimable, but the expenses are subject to FBT – contact me for more information. These items are generally coded to ‘Entertainment – Deductible’.

Food and drink on premises

There is an exemption under the FBT Act for food and drink supplied on premises for employees during work hours (but not associates). The expenses are tax deductible and the GST is claimable. Mostly these expenses are coded to ‘staff meetings’ but Christmas parties (onsite during work hours) would be coded to ‘Entertainment – Deductible’. For associates the rules are the same as outlined above.

50/50 Method

I never recommend this method so if you’re going to provide entertainment to customers, suppliers and their associates and employees and their associates (e.g. corporate box) keep a record of customers, suppliers and their associates versus employees and their associates.

Happy Holidays.

 

Thanks, and if you have any queries call me on 1300 722 570 or email bill@southerncrossaccounting.com.au

Regards,
Bill Parkes
Director
Southern Cross Accounting – Redlands

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