Getting geared up planning your office Christmas party? Or lashing out on gifts for your employees?
Good for you. Chances are you have a happy gaggle of staff on board.
Yet, be aware, the ATO may not look so fondly on your upcoming cash splash.
Your FBT obligations with staff parties and gifts
So with offices across the country firmly set in party planning mode, we thought it a timely opportunity to refresh you on what you can and can’t claim as a deduction and FBT rules. We know, we know, no one likes rules at Christmas.
But someone has to do it.
Fringe Benefits Tax (FBT)
Let’s start with FBT.
FBT comes into play when an employer provides a benefit to an employee outside of their normal salary or wage – aka Christmas parties and presents.
If you are taking out your staff for a Christmas party where you provide food and drinks, you will need to pay FBT as you are essentially providing entertainment.
- Golf day and drinks at the clubhouse? That will incur FBT.
- Private function room at the races? This one too – FBT.
The only situation where this may not apply is if the total bill for the party is under $300. This can then be classified as a minor benefit exemption and FBT need not be paid.
If you are hosting a party offsite from your business premises, keep the cost per person under $300 and avoid FBT.
- Onsite party in the school hall? FBT exempt – bingo!
Do note though, the ATO will be on the lookout for double-dipping this Christmas. If your party is classed as entertainment and you are FBT-exempt, you cannot claim a tax deduction for the cost.
For those who want to avoid FBT altogether, host your Christmas party onsite and on a workday and no FBT will apply.
Happy days!
Christmas gifts
We all like to show our appreciation to our staff and clients at the end of a hard-working year. But what can and can’t you claim?
Interestingly, it depends on what sort of gift-giver you are.
Do you prefer to splash on a nice bottle of wine or an experience the whole family can enjoy?
The gift you choose has ramifications on the FBT, tax deductions and GST input credits you can claim.
For the gift-giver:
- Gifts to employees – are FBT exempt if under $300, tax-deductible however no GST input credits can be claimed.
- Gifts to clients and contractors – No FBT, tax deductible and GST inputs can be claimed.
For the experience-giver:
- Gifts to employees – FBT exempt if under $300, and if exempt, no tax deduction or GST inputs can be claimed.
- Gifts to clients and contractors – No FBT, tax deduction or GST inputs can be claimed.
Future Christmas planning
We generally find once businesses know what they can and can’t claim and the FBT ramifications, they tend to stick to the same Christmas plan each year to not be caught out with any unforeseen FBT.
Want to throw an epic Christmas party but still unsure of the rules? Get in touch with the team if you need some guidance on your FBT and tax obligations to ensure you have the merriest of Christmas parties possible.
