There is no separate fringe benefits tax (FBT) category for Christmas parties as fat as the ATO are concerned, and you may encounter many different circumstances when providing these events to your current staff, past and future employees and their associates (wives and kids).

“Exempt property benefits”

So, this one is probably the easiest to understand – the costs (such as food and drink) associated with your work Christmas party is exempt from FBT if is is held on a working day, on your business premises and consumed by your current employees. The property benefit exemption is only available for employees, not associates. For associates – keep it under $300.

Exempt benefits – minor benefits – $300 threshold

The provision of a Christmas party to your employees may be considered a minor benefit and exempt if the cost of the party is less than $300 per employee and certain conditions are met. The benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300.The threshold of less than $300 applies to each benefit provided, not to the total value of all associated benefits.

Gifts provided to employees at a Christmas party

The provision of a gift to your employees at Christmas time may be a minor benefit that is an exempt benefit where the value of the gift is less than $300.

Where a Christmas gift is provided to an employee at a Christmas party that is also provided by the employer, the benefits are associated benefits, but each benefit needs to be considered separately to determine if they are less than $300 in value. If both the Christmas party and the gift are less than $300 in value and the other conditions of a minor benefit are met, they will both be exempt benefits.

Tax deductibility of a Christmas party

The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction.

The costs of entertaining clients are not subject to FBT and are not income tax deductible.

Christmas party held on the business premises

A Christmas party provided to current employees on your business premises or worksite on a working day may be an exempt benefit. The cost of associates attending the Christmas party is not exempt, unless it is a minor benefit.