‘Tis the season to be jolly!
Fringe Benefits Tax (FBT) can be confusing, especially when there is no separate FBT category for Christmas parties. You may encounter different circumstances when providing these parties for your team and preparing gifts. We understand your struggles and have simplified things for you.
1, Christmas Parties and Gifts for staffs
If you are not a tax-exempt organisation and do not use the 50-50 split method for meal entertainment, the following explanations may help you determine whether there are FBT implications arising from a Christmas party.
Exempt Property Benefits:
The costs associated with Christmas parties (such as food and drink) are exempt from FBT if they are provided on a working day, on your business premises and consumed by current employees. These costs are an “Exempt Property Benefit”. The property benefit exemption is only available for employees.
Exempt Benefits – Minor Benefits:
The provision of a Christmas party to an employee may be a minor benefit and exempt if the cost of the party is less than $300 per employee and certain conditions are met. The benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300. The threshold of less than $300 applies to each benefit provided, not to the total value of all associated benefits.
Gifts provided to employees at a Christmas party:
The giving 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.
Where a Christmas gift is provided to an employee at a Christmas party, the benefits are associated benefits, but each benefit needs to be considered separately to determine if they are less than $300 in value. If both the Christmas party and the gift are less than $300 in value each and the other conditions of a minor benefit are met, they will both be exempt benefits.
2, How about Client gifts?
As the gift is an expense to your business, it is generally considered to be a tax deduction. The ATO has considered the act of gift making to clients, and several cases exist where the tax treatment has been tested in the courts. If there is an expectation that the gift will either generate future business from the client or motivate them to refer your services to others, it is considered that the expense of the gift was business promotion and is a tax deduction.
It should be noted that the gift does not constitute the provision of entertainment which is a non-taxable deduction.
If you are unsure about the FBT implications of your Christmas party or gifts, please contact our expert Accountants today, and they can assist you!