October is when many Gold Coast businesses lock in their end-of-year venues. Before you sign the booking form, it's worth knowing that three choices decide whether your Christmas party attracts fringe benefits tax (FBT): where it's held, who's invited and how much it costs per person.

Get those right and your party can be FBT-free. Get them wrong and you could face a tax bill you didn't plan for.

The three questions that decide your FBT

• Where is it? A party held on your business premises, on a working day, for current employees only means no FBT on the food and drink.

• Who's coming? Once partners are invited, or the party moves to a restaurant, venue or boat, the cost per head becomes the deciding factor. There's no FBT on the share of the party that relates to clients.

• What does it cost per head? If the cost for each person is under $300, it can generally be treated as a "minor benefit" and no FBT applies.

How common party plans stack up

• Lunch in the office on a weekday, staff only: No FBT on the food and drink.

• Dinner at a local restaurant, partners invited, $150 a head: Generally FBT-free under the minor benefits exemption.

• Harbour cruise with partners, $350 a head: FBT is likely to apply for both staff and their partners, because the cost is $300 or more per person.

• Clients join the celebration: No FBT on the clients' share.

• Taxis home: Taxi travel directly to or from the workplace is exempt. Trips that start or finish somewhere else may not be.

The trade-off most people miss

FBT-free doesn't mean tax-deductible. If your Christmas party isn't subject to FBT, you can't claim an income tax deduction for its cost, and you generally can't claim GST credits for the food, drink or transport either.

Where FBT does apply, the opposite is usually true: you can generally claim the cost, the GST credits and the FBT itself. Staying under the $300 threshold is still the simplest and cheapest option for most small businesses, but it's worth running the numbers if you're planning something bigger.

What about Christmas gifts?

A gift to an employee worth less than $300 per person is generally FBT-free, as long as it would be unreasonable to treat it as a fringe benefit. Gifts to clients don't attract FBT.

Whether you can claim a deduction for a gift depends on whether it counts as entertainment (such as concert or event tickets) or not (such as a hamper or a gift voucher). If you're planning both a party and gifts, check with us first so the two don't push you over a threshold.

Bookkeeping tips for a stress-free FBT year-end

• Keep a guest list split by type. Note employees, partners and clients separately. You'll need it to work out the cost per head and the FBT position.

• Ask for an itemised invoice. Food, drink, venue hire, entertainment and transport may be treated differently.

• Code it correctly. Record non-deductible entertainment in its own account so it isn't claimed as a deduction or for GST credits by mistake.

• Keep your transport records. Taxi receipts or vouchers should show where each trip started and ended.

• Save everything in one place. Your FBT year ends on 31 March, and tidy records now make that much easier.

How Count Gold Coast can help

Our Bookkeeping team can make sure your Christmas party and gift costs are recorded the right way, keep your FBT records in order and flag anything that needs a closer look before year-end. Call 1300 667 897 or email [email protected] to plan a party your books will thank you for.

This article contains general information only and does not take into account your personal circumstances. Seek professional advice before acting on it.

Sources

ATO – Common entertainment scenarios for business

ATO – Minor benefits exemption

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