One thing that some businesses forget to consider is, if they will need to pay Fringe Benefits Tax (FBT). Fringe Benefits Tax (FBT) is a tax payable by employers for benefits paid to an employee (or an employee’s associate e.g. a family member) in place of salary or wages.

Here are some tips and tax cheat sheet to help you.

Scenario 1 : Christmas party held on the business premises

A Christmas party provided to current employees on your business premises or worksite 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.

The implications for the employer in this situation would be as follows.

If…

Then…

current employees only attend

there are no FBT implications as it is an exempt property benefit.

current employees and their associates attend at a cost of $180 per head

  • employees – there are no FBT implications as it is an exempt property benefit, and the minor benefit exemption could also apply*
  • associates – there are no FBT implications as the minor benefit exemption applies.*

current employees, their associates and some clients attend at a cost of $365 per head

  • employees – there are no FBT implications as it is an exempt property benefit
  • associates – a taxable fringe benefit will arise as the value is equal to or more than $300
  • clients – there is no FBT payable and no income tax deduction.

Scenario 2 : Christmas party held off business premises

The costs associated with Christmas parties held off your business premises (for example, a restaurant) will give rise to a taxable fringe benefit for employees and their associates unless the benefits are exempt minor benefits.

The implications for the employer in this situation would be as follows.

If…

Then…

current employees only attend at a cost of $195 per head

there are no FBT implications as the minor benefits exemption applies.*

current employees and their associates attend at a cost of $180 per head

there are no FBT implications as the minor benefits exemption applies.*

current employees, their associates and clients attend at a cost of $365 per head

  • employees – a taxable fringe benefit will arise
  • associates – a taxable fringe benefit will arise, and
  • clients – there is no FBT payable and the cost of providing the entertainment is not income tax deductible.

How about client gifts? What you need to think about?

Gifts provided to employees or their associates will typically constitute a property fringe benefit and therefore are subject to Fringe Benefits Tax unless the minor benefit exemption applies. Gifts, and indeed all benefits associated with the Christmas function, should be considered separately to the Christmas party in light of the minor benefits exemption.

Type of Gift

Gifts to employees and their associates

Gifts to Clients

Non-Entertainment Gifts (Wine, Spirits, Flowers, etc)

A taxable fringe benefit will arise if the value is equal to or more than $300 (GST inclusive)

No FBT payable and the cost is generally income tax/GST deductible

Entertainment Gifts (tickets holidays etc)

A taxable fringe benefit will arise if the value is equal to or more than $300 (GST inclusive)

No FBT payable but the cost is not income tax/GST deductible

For more information on this you can contact us at 02 4732 3844 or visit https://judgeaccountants.com.au for an Australia-wide service.