If you’re planning on celebrating Christmas with your employees, make sure you know the Fringe Benefits Tax implications.
Fringe Benefits Tax (FBT) is the tax employers pay on benefits they provide to employees, their family or other associates in addition to, or as part of, their salary or wages.
Before we provide some examples below, here are a few questions you should ask yourself when planning your next work event.
Is the benefit ‘minor’?
Providing a Christmas function on your business premises/worksite on a working day, will likely be exempt from Fringe Benefits Tax, however the cost of associates (i.e. family members) attending will not be exempt, unless the benefit is ‘minor’*.
Holding a Christmas function offsite (i.e. restaurant or function venue) will likely result in a taxable Fringe Benefit in respect to both
employees and associates, to the extent that it is not considered to be ‘minor’*.
The Gift of Giving Gifts
Where an employer provides a Christmas gift to an employee at a Christmas party that they are holding, the benefits (the gift & the party) are associated benefits, but each benefit needs to be considered separately to determine if they are ‘minor’*
It’s also important to know the type of gift you are giving and whether the ATO considers it to be an ‘entertainment’ gift or not.
Gifts such as tickets to concerts, movie passes, and holidays, are classified as entertainment gifts by the ATO and are usually subject to FBT. However, hampers, vouchers, bottles of wine and other similar gifts are classified as ‘non-entertainment’ and are generally exempt from FBT.
To summarise, there are a few important questions to ask yourself before you throw your Christmas party. The planning of your Christmas Party will be key in determining whether it will be subject to FBT and tax deductible.
*Minor benefit = the FBT taxable value is $300 or less per head
Author: Craig Smith, Head of Business Services
Contact: (03) 9551 2822