Understanding Fringe Benefits Tax (FBT) and Christmas: A Guide for Employers
As the festive season approaches, many employers start thinking about how they can celebrate Christmas with their teams. Christmas parties, gifts, and other end-of-year perks are a great way to show appreciation for hard work and boost morale. However, before you get too carried away with the celebrations, it’s important to understand if and when FBT will apply.
What is Fringe Benefits Tax (FBT)?
Fringe Benefits Tax (FBT) is the tax an employer pays on non-cash benefits provided to employees (or their associates) in lieu of, or addition to, salary and wages. The ATO considers a wide range of non-cash benefits as fringe benefits – they include items such as company cars, low-interest loans, and even some gifts and entertainment.
Christmas Parties and FBT
One of the most common festive perks provided by employers is the Christmas party. Whether you’re hosting a formal event at a venue, or having a casual office gathering, these celebrations may fall under the FBT rules. The good news is that not all Christmas parties attract FBT, provided you meet certain conditions.
- Minor Benefits Exemption – If the total cost of the Christmas party per person is $300 (including GST) or less, it may qualify for the minor benefits exemption, which means it won’t attract FBT. However, you will also not be able to claim any GST credits or a tax deduction on the expense. If the cost per person is over $300, FBT may need to be considered for employees and their associates.
- Clients & Suppliers – If any of your clients and/or suppliers attend your Christmas party, the costs applicable to these attendees will be exempt from FBT regardless of the amount per person. This also means the expense is exempt from claiming GST credits and a tax deduction.
Christmas Gifts and FBT
When it comes to giving gifts to employees at Christmas, FBT considerations also come into play. Gift-giving can be a wonderful way to show appreciation, but there are rules you must follow to avoid unintended tax liabilities.
- Gifts Under $300 – Like Christmas parties, where the total value of the gift doesn’t exceed $300 (including GST) per person, it is unlikely to attract FBT. However, unlike Christmas parties, the GST credit and tax deduction is available. Common examples of gifts under this category include gift cards, hampers, or wine.
- Gifts Over $300 – Gifts that exceed the $300 per person cap are subject to FBT when provided to employees or their associates. However, gifts to clients and suppliers continue to be exempt from FBT.
- Gifts of Entertainment – If you’re giving gifts that involve entertainment (such as tickets to events, or holiday accommodation), the rules are slightly different. The $300 per person cap is still applicable in relation to FBT, but GST credits and a tax deduction are not available when under the cap, or if the gift is for a client/supplier.
Unsure if your festive season is subject to FBT? Speak to one of our team at Macro Group today.
Have more questions? Call or click to discuss with a Macro Group team member.
The Macro Group Team
Date: 22/11/2024
The Macro Group Limited AFSL:485843 Tax Agent Number 24 76 5236.
The information in this article contains general information only. We have not taken into consideration any of your personal objectives, financial situation or needs. Before taking any action, you should consider whether the general advice contained in this communication is appropriate to you having regard to your circumstances and needs, and seek appropriate professional advice if you think you need it. We recommend that you consult a licensed or authorised financial adviser if you require financial advice that takes into account your personal circumstances.