If fringe benefits tax (FBT) is applicable in your business, you need to make sure you plan ahead and consider the FBT implications of providing Christmas parties and gifts. There is no separate FBT category for Christmas parties and you may encounter many different circumstances when providing these events to your staff.
So what is FBT?
The FBT year runs from 1st April each year to the 31st March the following year. There are some benefits that employers give to their employees that have a monetary value. These benefits are given in addition to or as part of their salary or wages. Because they have a monetary value attached to them they are taxed, but separate to your income tax, in the form of FBT or Fringe Benefits Tax. As an employer you need to be aware of benefits that your employees are being given and ensure that the appropriate tax is calculated and paid to the ATO.
Here is our FBT checklist for your Christmas party:
- Cost – how much it costs?
The cost of food and drinks
Some costs are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees.
- Premises – events held on business premises on a normal work day are treated differently to an event outside of work
A Christmas party on the business premises
A Christmas party provided to current employees on your business premises on a working day may be an exempt benefit. The cost of associates attending the Christmas party is not exempt, unless it is a minor benefit.
- Guests – there are different rules for employees and clients.
The costs of entertaining clients are not subject to FBT and are not income tax deductible.
Christmas gifts may attract FBT, but there are some things to consider:
- Gifts – the type of gifts and who you are giving to? Which type of gifts are you giving to your guests? Gifts are treated differently i.e. bottle of wine or a Christmas voucher, when it comes to FBT there is a big difference. There are also different rules for employees and clients.
Gifts to employees
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.
Where a Christmas gift is provided to an employee at a Christmas party that is also provided by the employer, 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 and the other conditions of a minor benefit are met, they will both be exempt from FBT.
Have you noticed our #FridayExpertTips... here's one that relates to #Taxation
"Do you know the Tax Deductions and offsets for which you might be eligible this Financial Year? They change every year so check with your Tax Advisor!"