Guidelines for Australian Businesses
When celebrating Christmas at work, Australian businesses must be mindful of Fringe Benefits Tax (FBT) and other tax implications related to hosting events, gift-giving, and receiving.
Here are some considerations to keep in mind before entering the festive season.
Firstly, let’s run through an FBT overview, what it is, some of the benefits and examples of what can be excluded.
Fringe Benefits Tax (FBT)
FBT is a tax paid by employers on certain non-cash benefits provided to employees, their families, or other associates. It is separate from income tax and is calculated on the taxable value of the fringe benefit.
Examples of fringe benefits:
- Entertainment, such as concert tickets
- Reimbursing personal expenses like school fees
- Offering discounted loans
- Salary sacrifice benefits
Exclusions from fringe benefits:
- Salary and wages
- Superannuation contributions
- Employee share acquisition schemes (approved)
- Termination payments
How does FBT relate to hosting a Christmas Party?
Hosting a staff Christmas party may fall under tax-exempt entertainment fringe benefits.
FBT applies to the cost of the party if it is provided to employees and their associates – partners, family etc.
However, some things to think about are:
- If the party is held on a workday and is exclusively for current employees, FBT does not apply to the cost of food and drink.
- If the party is hosted off the business premises, FBT does not apply if the cost per person is less than $300 and the benefit is considered minor as it would be unreasonable to treat it as a fringe benefit.
How does FBT relate to Christmas Gift Giving?
The general rule to be mindful of, is that gifts to employees are FBT-free if their value is less than $300 per employee. The threshold of less than $300 applies to each benefit provided, not the total value.
As with all accounting items, don’t forget to keep all records relating to the Christmas party / gift related fringe benefits you provide, including how you worked out the taxable value of benefits.
It’s important to get on top of how FBT works before you provide perks and extras this Christmas, otherwise you may end up with an unexpected FBT liability.
If you would like business specific guidance on Christmas party’s + gifts and FBT implications, please get in touch with Hopscotch on 1300 HOP 123.
