Parties & Functions

Can you claim this as a business expense? Does Fringe Benefits Tax apply? What are fringe benefits, and why do we need to explain them? 

Whether or not you can claim a party or function as a business expense depends on who attends and where it is being held. In some cases, the provision of a staff party for an employee may be considered a minor benefit and exempt from Fringe Benefits Tax (FBT) if the cost is less than $300 per employee and certain conditions are met. This exemption also applies to the employee’s family members or spouse.

The cost of providing a party is tax-deductible for income tax purposes only to the extent that it is subject to FBT. Any expenses exempt from FBT cannot be claimed as an income tax deduction. Similarly, GST credits can only be claimed if a cost is tax-deductible. Therefore, if you cannot claim it as an income tax deduction, you cannot claim the GST credits. The Australian Taxation Office (ATO) provides guidelines on FBT related to different business structures.

Minor Benefits Exemption: 

The $300 threshold is applied separately to each benefit, gift, or party. For example, an employee could attend a workplace party costing the employer $280 and receive a gift worth $250, but because these amounts are treated separately, there are no FBT implications. 

However, the minor benefit exemption does not apply to any party other than employees. Therefore, if a non-entertainment gift is given to a client or supplier, it can be claimed as a deductible expense, and GST can be claimed.

Gifts for Your Employees: 

A gift to an employee, such as a hamper of goodies, may be considered a minor benefit exempt if the value is less than $300. Where the gift is given at the party, each benefit can be considered separately. 

Gifts like wine, food, hampers, vouchers, etc., are not considered entertainment. If the gift is a minor benefit (i.e., less than $300), then the gift is not tax-deductible, and therefore, GST is not claimable for gifts to employees and their family members. No FBT applies to gifts of less than $300. 

For gifts over $300, FBT may apply for employees and their family members, and it is tax-deductible. Gifts such as a holiday, membership to a club, or tickets to a theatre, sporting or musical event are considered entertainment. The gift is not tax-deductible for minor benefits under $300; no FBT applies. For employees given a gift over $300, the gift is tax-deductible but is also subject to FBT.

Gifts for Your Clients and Suppliers:

Gifts may be classified as “entertainment” or “non-entertainment.” Gifts like wine, food, hampers, vouchers, etc., are not considered entertainment. Non-entertainment gifts to clients or suppliers are deductible, and GST is claimable with no FBT implications. 

Gifts such as a holiday, membership to a club, or tickets to a theatre, sporting, or musical event are considered entertainment. The entertainment gift is not tax-deductible for clients and suppliers, no FBT applies, and no GST is claimable.

Summary – Gifts: 

Giving gifts to your staff or clients is a personal choice you can make as a business owner. However, please note that some clients may not be allowed to accept gifts due to their business’s Code of Conduct (e.g., government workers). 

We remind you that the topic of entertainment, tax deductibility, and fringe benefits tax is complex and not always straightforward. If in doubt, check with your tax agent and refer to the ATO website for detailed guidance.