Entertainment not on employer's premises

Generally, any function provided for employees not on the employer's premises is subject to FBT.

Christmas parties are only exempt from FBT as minor benefits if the total value of the benefit to the employee (and any family members attending) is under $100

A common mistake for employers is to calculate the cost per head rather than per employee.

Example

An employer provides a Christmas party at a local restaurant for all employees.

The catering cost per person is $60 for food and drink.  Employees are entitled to bring their spouses to the function.

If an employee attends the function alone, the cost is below $100 and there is no FBT liability as the cost qualifies as a minor benefit.  The employer would not be entitled to claim a deduction for the cost of providing that benefit.

If an employee attends the function with his/her spouse, the total value of the benefit is $100 or more.  Consequently, the entire amount is subject to FBT but the employer can claim a tax deduction for both the cost of the benefit and any FBT paid.

Entertainment on employer's premises

Except for tax exempt organisations, food and drink provided to employees on the employer's premises on an ordinary working day are exempt from FBT.

‘Food and drink' similarly provided to family members on the employer's premises can be exempt if it is a minor benefit (see below) and the aggregate value of the benefit provided to the employee and any family members is less than $100.