Fringe benefits tax and your staff Christmas party
If you’re having a staff Christmas party this year you’ll not only have to consider the government’s current restrictions on the number of people at gatherings but you will also need to think about whether there are any fringe benefits tax (FBT) implications.
So, what is a fringe benefit? A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages.
For FBT purposes, an employee includes a current, future or past employee; director of a company; beneficiary of a trust who works in the business.
Is your Christmas party and business gift giving a fringe benefit and does FBT need to be paid on it?
Exempt property benefits
The cost of food and drink associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. The property benefit exemption is only available for employees, not associates.
Exempt minor benefits
The cost of a Christmas party for an employee may be a minor benefit and exempt if the cost of the party is less than $300 per employee. The benefit provided to an associate of the employee (e.g. their partner) may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300.
Gifts provided to employees at Christmas
The provision of a gift to an employee at Christmas time may be a minor benefit that is an exempt benefit where the value of the gift is less than $300.
Gifts provided to clients and suppliers at Christmas
FBT does not apply to any party or gift costs that relate to clients or suppliers.
Christmas party held off business premises
The costs associated with Christmas parties held off your business premises (e.g. a restaurant) will give rise to a taxable fringe benefit for employees and their associates unless the benefits are exempt minor benefits (less than $300 per person).
Is your Christmas party and business gift giving tax deductible?
The cost of providing a Christmas party and gifts is income tax deductible only if it is subject to FBT. Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction.
The costs of entertaining clients and suppliers are not subject to FBT and are not income tax deductible.
If you’re wondering how fringe benefits might affect your small business, get in touch with us.
Our team are experts in budgeting, accounting, and financing for business and can help you understand your taxation requirements.
If you have any other questions or would like to speak with us directly about your business, don’t hesitate to reach out at any time.
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