Tax Savings Strategy 222 | Christmas Party

Holding a Christmas party on business premises during work hours is the most tax effective option for businesses. The cost of a light meal and drink will be tax deductible to the employer with no FBT liability incurred. The meal can be several courses and include a variety of foods, but must exclude alcohol. In addition, the food must not be so lavish, such as a 10-course degustation, that it turns into entertainment.

In reality, most Christmas parties are not held on business premises, but at a restaurant. If the cost of food, drinks and alcohol is kept to less than $300 per employee, no FBT is payable by the employer. Unfortunately for the employer, they will not be able to claim a tax deduction or GST credit for the cost.

A non-entertainment gift valued at less than $300 given to an employee will be tax deductible to the employer. Tax deductible gifts include:

• A coffee machine.
• Books or novels.
• Flowers or chocolates.
• Christmas or gift hamper.
• Bottle of wine, spirits or liqueur.
• A bottle of perfume or aftershave.
• Vouchers for retailers e.g. David Jones, Myers, Jack London, etc.
• Watch.
• Handbags or wallets.