The end of the year is fast approaching and its finally time we put our phones down, hung up our stockings and sat back with a glass of eggnog. Here at RA this will be accompanied by a wholesome team dinner for our Christmas party, but if you are considering having a Christmas shindig for your team you may be forgetting one thing – fringe benefits tax.
Fringe benefits tax?
Fringe benefits tax is a tax employers pay on certain benefits they provide to their employees – including employees’ family or other associates. FBT is separate to income tax and is calculated on the taxable value of the fringe benefits provided.
When would fringe benefits tax apply?
- A Christmas party provided to current employees held on the premises on a working day may be an exempt benefit.
- The costs associated with a Christmas party (food and drink) are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees.
- Gifts provided to employees at a Christmas party are exempt from FBT if they meet the minor benefits exemption rule and are worth less than $300.
What do I keep in mind when I’m planning to make sure I don’t accrue any FBT?
- How much is the event/gift going to cost?
- When and where is the event going to be held?
- Who is going to be invited? Are exclusively current employees going to attend or a wider base of people?
- What type of gifts are going to be given if I’m giving gifts?
- Who is going to be receiving the gifts?
What about Christmas parties off-site?
Costs associated with Christmas parties held off your business premises will give rise to a taxable fringe benefit for employees and their associates unless the benefits are exempt minor benefits. For example, if exclusively current employees and their associates attend for $180 per head, there are no FBT implications as the minor benefits exemption applies. However, if current employees, their associates and clients attend at a cost of $365 each – a taxable fringe benefit will arise for employees and associates. For clients, there is no FBT payable and the cost of providing the entertainment is not income tax deductible.