When the Christmas season is upon us, party planning is in full swing and employers often consider gifts for staff and their families. You want to make sure that all of your Christmas cheer does not leave you with Fringe Benefits Tax (FBT) surprise.
Christmas Parties
When a Christmas party is not held on business premises and the cost per employee is less than $300 per head ($150 per head if partners attend), it is classed as a minor benefit and no FBT will be payable. However, the function is classed as “entertainment” and as such no GST or tax deduction will be claimable.
If the function is held on the business premises on a work day for employees and includes a light meal without alcohol, no FBT is payable and both GST and a tax deduction can be claimed.
However, when the function is held on business premises on a work day with the employees’ families attending and alcohol being served (with the cost per employee being less than $300 per head), no FBT is payable and neither GST or a tax deduction can be claimed.
When the cost exceeds $300 per employee, then FBT is payable on the family portion and a tax deduction is claimable only for the portion for which FBT is payable.
Gifts
Employers may choose to buy gifts to its employees. When gifts are provided to employees at the same time as the Christmas party, they do not need to be included in the $300 minor benefit cost allowed for the party. However, the gifts must be less than $300 and not considered as “entertainment” (Eg: concert tickets). In this situation, no FBT is payable and GST and a tax deduction can be claimed on these gifts.
After taking the information listed above into consideration, employers can have a tax effective holiday season!