Chartered Accountants Auckland

17319360_s jetIs it too early to talk Christmas yet?  Well our good friends at CCH think not and here’s some Q&A’s they’ve put together to answer all your Christmas tax questions.  The first, in the series, is all about claiming travel costs to your firms Christmas party:


Each year Santa holds a Christmas party for the elves in early December. He is thinking of inviting the Iceland division up for the Christmas party this year. Santa would pay the airline costs for ten elves to travel from Iceland to the North Pole. Are there any tax issues with this?


Christmas party costs

The cost of the Christmas party itself will be subject to the entertainment rules, so Santa’s deduction for this expenditure will be limited to 50%.

Travel costs

The travel costs to the party will be deductible to Santa as staff remuneration costs.

The travel costs will be subject to FBT unless the de minimis exemption applies. Providing travel to a Christmas party is a fringe benefit.

De minimis exemptions

For employers accounting for FBT on an annual or income-year basis, the total taxable value of unclassified benefits must not exceed:

• $1,200 per employee pa

• $22,500 per employer pa.

Travel costs for independant contractors

Santa decides he may as well invite the reindeer to the Christmas Party too. They are engaged as independent contractors, rather than employees.  The reindeer are based in Greenland, so Santa will incur airline costs in flying the Reindeer to the party. Will FBT apply to the travel costs?


Maybe.  Whether FBT applies will depend on whether the independent contractors are treated as employees for FBT purposes. For FBT purposes the definition of employee is wide and catches some relationships which might not intuitively be classified as employment relationships. Examples of relationships caught by the FBT rules include:

• past, present and future employees;

• anyone associated with past, present or future employees;

• shareholder-employees; and

• people receiving schedular payments (other than payments to non-resident contractors).

Therefore, FBT will not apply to the travel costs provided the reindeer have never been Santa’s employees, they have never been associated with any of Santa’s employees, and payments to the reindeer are not schedular payments. (Examples of schedular payments include sales commission payments, directors fees, and payments to models, photographers, journalists, writers artists, entertainers, farm and forestry workers and labour-only builders).


Reference:  CCH New Zealand

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