We all love to spread the Christmas cheer and share the holiday season with our staff, friends & families.
Before you provide your employees with Christmas gifts or parties we encourage you to consider the Fringe Benefits Tax implications.
Background – what is Fringe Benefits Tax (“FBT”)
Fringe Benefits Tax (FBT) is charged to employers that provide employees with non-cash benefits like food and drink, gifts, motor vehicles or free travel. The rationale for FBT is that the ATO would otherwise miss out on tax revenue where employers provide non-cash benefits rather than paying the benefit in the form of a salary or wage.
FBT is only paid on benefits provided to employees (and their associates), it is never paid on benefits you provide to your clients. FBT can be very costly for employers if the benefits that they provide are not exempted.
Staff Gifts & Christmas Parties
Providing employees with Christmas gifts & holding a Christmas party is common practice. Here are a few tips to ensure you do not pay FBT on your Christmas events:
- Ensure that the cost of the gift or party costs less than $300 per employee (minor fringe benefits tax exemption); or
- Hold the Christmas Party on your premises (Property benefit exemption);
- When recording the Christmas gift or party in your accounting software, record how many employees, clients & associates attended.
- The ATO have recently changed their view on the minor benefits exemption to Christmas parties and gifts. The minor benefits threshold of less than $300 applies to each benefit provided, not to the total value of all associated benefits. This means that you can provide each employee with a $299 Christmas Gift & a $299 Christmas Party – both will be exempt under minor fringe benefits.
- If you use the 50%/50% entertainment method, you cannot use the minor fringe benefit exemption.
If you have any questions on Fringe Benefits Tax please contact QC Accountants at [email protected] or 07 5593 5848.