For FBT purposes there may be different consequences for payment of the taxi fare.  In respect of clients, the taxi fare is considered to be part of the entertainment expense and no deduction is allowable.  For employees, if the fare is for travel from home to the place of entertainment (not being their place of employment) and return home again, the benefit is considered to be for the facilitation of entertainment and is not a separate benefit from the entertainment itself.

The result is that the employer would then have to rely on the total entertainment package being under $300 for the minor benefit rule to apply.

However, if the Christmas function is held on the employer's premises and the employer chooses to send the employee home by taxi, the taxi trip is FBT exempt provided that the trip is a single trip, which began at the employee's place of work.  The exemption would apply if the employee went from the work place to home, or any other place.  However, the exemption would not apply if the trip was broken and continued at some other time.  For example, the employee gets a taxi from the workplace and goes to a nightclub; that trip is deductible and exempt from FBT.  If the employee later gets another cab to home, that leg of the trip would be deductible to the employer but FBT would be payable.

Note however, that if the employer is using the 50/50 split method of calculating FBT and deductions, the taxi travel would always be included in the cost of entertainment, and there would be no exempt journey for travel from the workplace to home.

See also our article about FBT and Christmas Parties