As the festive season approaches, many Australian businesses and not-for-profit organisations are planning Christmas parties and employee gifts. It’s a wonderful opportunity to celebrate a successful year and reward your team but it’s equally important to understand the Fringe Benefits Tax (FBT) implications that can come with these festive gestures.
Before you pop the champagne or wrap the gifts, here’s a quick guide from Hopscotch Accounting, to help you stay compliant and avoid unexpected FBT surprises this Christmas.
What is Fringe Benefits Tax (FBT)?
Fringe Benefits Tax (FBT) is a tax paid by employers on certain non-cash benefits provided to employees, their families, or associates. It is separate from income tax and is calculated on the taxable value of the benefit provided.
Common examples of fringe benefits include:
- Entertainment (e.g. concert tickets or restaurant meals)
- Reimbursement of private expenses (such as school fees)
- Low-interest or interest-free loans
- Salary sacrifice arrangements
Exclusions from fringe benefits include:
- Regular salary and wages
- Superannuation contributions
- Approved employee share schemes
- Termination payments
FBT and the Work Christmas Party
A work Christmas party is considered a form of “entertainment” and may attract FBT depending on how and where the event is held.
Here are a few key considerations:
- On-site parties:
If the party is held on business premises during a normal workday and only employees attend, the cost of food and drinks is generally FBT exempt. - Off-site parties:
If your event takes place at a restaurant or external venue, FBT does not apply if the total cost per person is under $300 and the benefit is considered minor and infrequent.
FBT and Christmas Gift Giving
Gift-giving is another great way to show appreciation to staff and clients but be mindful of the FBT rules that apply.
- Gifts to employees are FBT-free if the value is under $300 per person.
- The $300 threshold applies per benefit, meaning each separate gift or function can be assessed individually.
- Gifts over $300, or provided frequently, may attract FBT.
To stay compliant, ensure you keep detailed records of all festive expenses, including invoices and calculations of taxable values.
Stay Ahead This Christmas.
Understanding how FBT applies to your Christmas parties and gifts can help your organisation enjoy the festive season without an unexpected tax bill.
At Hopscotch Accounting, we specialise in FBT advice for small businesses and not-for-profit organisations. Our team can guide you through FBT exemptions, minor benefits rules, and year-end reporting to help you stay compliant and make the most of your festive spending.
Get in touch with Hopscotch Accounting today on 1300 HOP 123 for personalised advice on FBT, payroll, and end-of-year tax planning.
