Just like every day people, business owners are just as likely to purchase gifts for employees and clients during the Christmas period. If you have been spending money on your clients, it’s important to note what type of spending is classed as legitimate business expenses and therefore deductible to your business. To put it simply, a business expense needs to be related to how your business generates income and so excessive spending may lead to some of your deductions being denied.
For clients, if you intend to invite them out to lunch or invite them to your Christmas Party, you need to be aware that this type of expenditure is classified as entertainment which is not deductible.
For employees, if you are intending on hosting a work Christmas party outside your office, it can be useful to try and keep the expenses associated with the Christmas Party below $300 including GST per employee. This will ensure you don’t get stung by Fringe Benefits Tax in April next year, as the expense will be classified as minor and fall under an FBT exemption. Unfortunately this exemption still won’t allow business owners to claim the GST credits associated with the Christmas Party.
Christmas gifts for the team should also be kept to under $300 (GST incl.) to ensure they do not incur FBT. Employers can claim a deduction for ad hoc Christmas gifts as long as they do not relate to entertainment.