‘Tis the season to be jolly and generous! There’s parties and presents but how can we navigate these festive costs with the ATO?
Before you dive in, let us share some hot tips with you.
With Christmas fast approaching, you may be planning your Christmas function or shopping for gifts for your staff. However, it’s important to consider the fringe benefits tax (FBT) implications of these items
Christmas Parties
Exemption: Generally, expenses incurred by employers for a Christmas party for their employees can be exempt from FBT if the cost per employee is kept below the threshold.
Threshold: The threshold for the exemption to apply is an amount up to $300 (inclusive of GST) per employee for the Christmas party. If the cost per head exceeds this, the entire amount may be subject to FBT.
Associates and Clients: If associates (e.g. family members) of employees attend the party, the expenses relating to them may also have the exemption applied as long as the cost per head threshold is not exceeded. If clients attend the party, their associated costs are not subject to FBT.
Tax Deductibility & GST Credits: Where the exemption applies, there will be no FBT, and a tax deduction and GST credits cannot be claimed on the cost of the party. Costs associated with clients are not tax deductible and GST credits cannot be claimed.
Record Keeping & Compliance: Employers need to keep accurate records of expenses and ensure compliance with FBT rules to claim the exemption.
Gifts
Exemption: Generally, Christmas gifts provided to employees may be exempt from FBT if the cost per employee is kept below the threshold.
Threshold: The threshold for the exemption to apply is an amount up to $300 (inclusive of GST) per employee. If the cost per head exceeds $300, the entire amount may be subject to FBT.
Type of Gift: The type of gift you give is broken down into two categories – entertainment/recreation, and non-entertainment. Entertainment/recreational gifts include things such as holidays, flights and accommodation, and tickets to an event, movie or show. Non-entertainment gifts include things like gift vouchers, hampers, alcohol, perfumes etc.
Tax Deductibility & GST Credits: The tax deductibility and GST credits on gifts depends on what type of gift you purchase. Where the cost of a non-entertainment gift is less than $300 (GST inclusive) per employee, No FBT will apply and a tax deduction and GST credits can be claimed on the gift. Where there is an entertainment gift purchased for less than $300 (GST inclusive) per employee, the exemption will apply but no tax deduction or GST credits can be claimed.
Important Considerations
Timing and Frequency: For the Christmas party and gift exemptions to apply, the frequency of such benefits provided throughout the year must also be considered as it’s not just limited to Christmas.
Employee/Associate/Client Classification: It is important to correctly classify expenditure relating to employees, associates and clients to determine the FBT treatment and obligations.
Please get in touch with one of our experienced accountants for any advice or assistance.
