Tax treatment for the year-end/new year parties

Lately, there are many companies having year-end/new year parties. Though not so big, small companies with a few employees also have year-end/new year parties in a cozy way. Hence Australian Taxation Office applies (ATO) tax treatment to party related expenses as below.

[Fringe Benefit Tax]

If an employer offers employees benefits irrelevant to business, he or she must pay fixed rates (almost 50%) of the benefits expense as an extra tax. For the application of FBT to Christmas party expense, ATO allows exemption if it is applicable as below.

  1. Party during normal business hours (Time basis)
  2. Party at a place of business (Place basis)
  3. Party only with current employees (People basis)
  4. Under $300 per person expense (Expense basis) – also applies to a gift for an employee

[Company tax deduction for the party expense]

A general party expense is not considered as expense because it is categorised as an Entertainment expense. But, expenses for FBT mentioned above are accepted as expense for deduction exceptionally. It can be regarded that the expenses are accepted for deduction due to employer’s tax payment.