Fringe benefits and Christmas
Planning an office party for your business?
Did you know there can be tax savings and tax implications?
We’ve all worked harder than ever this year to push through in trying circumstances with lingering effects of COVID and inflationary pressures in the background.
It is certainly time to kick up our heels, but business owners can work smart when it comes to arranging their work Christmas events to ensure they adhere to the rules and regulations surrounding tax deductibility and fringe benefits.
Read more to discover how to make your office Christmas party even more joyous this year.
Minor benefits exemption
According to the Australian Taxation Office (ATO), a minor benefit is a benefit that has a value of less than $300.
“You can take advantage of the $300 (including GST) minor-benefit exemption rule to hold a Christmas function for your current employees and their spouses without incurring FBT.”
The ATO states that it is exempt from FBT if it would be unreasonable to treat it as a fringe benefit, that is, if:
- the benefit is provided infrequently and irregularly
- the taxable value of the minor benefit and other similar or identical benefits (if they were treated as fringe benefits) is low
- the likely total taxable value of the minor benefit and other associated benefits is low (associated benefits are those provided in conjunction with the minor benefit, for example, electricity and telephone benefits provided as part of an accommodation package)
- it is difficult to calculate the taxable value of the benefit and any associated benefits
- the benefit is provided as a result of a contingency (for example, unexpected overtime).
You can take advantage of the $300 (including GST) minor benefit and exemption rule to hold a Christmas function for your current employees and their spouses if you hold your party on the business premises during the business day.
For costs below $300 per head you won’t incur FBT, but you won’t be able to claim tax deductions or GST credits either.
Christmas parties and fringe benefits tax (FBT)
According to the ATO, you will incur a fringe benefits tax on benefits given to employees over $300 as the ATO considers it as income other than salary or wages, paid by the employer.
So if you have something really fancy planned and the cost of food and drink consumed by employees and their spouses is over $300 per head at your in-house party, you will incur FBT on the expenses of your employees’ spouses or family members only.
The good news is, if you’ve planned your Christmas party to be at a venue, you won’t need to pay FBT if the costs remain under $300 per head.
And even better, if you have clients attending, you won’t incur FBT for them.
Unsure if your planned office party will incur FBT?
Speak to your business accountant before you don the party hats, just to be sure.
“If the cost per head exceeds $300 for food, drink or entertainment at your Christmas party, you could trigger a fringe-benefits tax liability — especially where spouses or family members attend.”
Fringe benefits and providing transport
Wanting to make sure your valued employees get home safely to their families after your big holiday bash is done and dusted?
If you pay for an employee’s taxi travel home from the Christmas party and you held the party at work premises, no FBT will apply.
For parties held at a venue away from your business premises, your employees’ taxi travel to the venue will be exempt from FBT, but their travel home from the event won’t.
The trip home from a venue party may be exempt under the minor benefits exemption but FBT exemption does not apply to taxi travel provided to associates of employees.
Your business accountant can advise you on the type of travel expenses exemption available to your business, depending on the location of your Christmas party and who attends.
The team at North Advisory is happy to answer any questions you may have about FBT and your business Christmas celebrations.
There are FBT rules around meals and entertainment also and ways in which you can apply different methods to track your FBT implications across a period of time longer than the lead up to Christmas.
To discuss your individual situation, contact our experienced and knowledgeable team today.
Accounting services for businesses at all stages of their growth
At North Advisory, we recognise that every business is different.
All industry sectors have unique needs and there’s not a one-size-fits-all accounting model and nor is there one single approach to managing FBT at Christmas time.
As a business owner, you need to feel confident that your accounting team understands the nuances of your business and that your finances are well managed.
Our team of Chartered Accountants knows exactly what needs to be done every month, quarter and financial year and particularly over the busy holiday season.
To arrange a consultation with one of our team, contact us today.
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
Christmas Benefits Can Trigger FBT
Parties, gifts and entertainment provided to staff at Christmas may attract FBT if not structured correctly.
The $300 Minor Benefit Threshold Matters
Keeping benefits under $300 per employee can allow businesses to access exemptions, reducing FBT exposure.
Cash and Gift Cards Are Treated Differently
Cash bonuses and gift cards are generally taxed as income and don’t qualify for FBT exemptions.
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Frequently Asked Questions
Do Christmas parties attract Fringe Benefits Tax (FBT)?
Yes, Christmas parties can attract FBT depending on factors such as the cost per head, where the event is held, and whether employees’ associates attend. Some events may qualify for exemptions.
Are staff Christmas gifts subject to FBT?
Christmas gifts may be subject to FBT depending on their value and type. Minor benefits under $300 may be exempt, while cash bonuses and gift cards are generally treated as taxable income.
Is GST claimable on Christmas functions and gifts?
GST credits may be claimable on certain entertainment expenses where FBT applies. However, GST is generally not claimable if the expense is exempt from FBT or relates to non-deductible entertainment.
What’s the difference between entertainment and a minor benefit?
Entertainment usually involves food, drink or recreation and can attract FBT. A minor benefit is a low-value, infrequent benefit (under $300) that may be exempt from FBT if certain conditions are met.
How can employers reduce FBT at Christmas?
Planning ahead, tracking costs per employee, using minor benefit exemptions correctly, and seeking advice can help minimise unexpected FBT liabilities during the festive season.
Do Christmas parties and staff gifts trigger Fringe Benefits Tax (FBT)?
Yes — North Advisory explains that Christmas parties, gifts and entertainment can trigger Fringe Benefits Tax (FBT) depending on who receives the benefit, where it’s held, and the cost per person. That’s why it’s important for business owners to plan ahead and understand the FBT rules before spending on celebrations, so you don’t end up with unexpected tax outcomes.
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