We wish you a FBT-free Christmas

While Christmas is the season of giving, employers should be mindful of potential Fringe Benefits Tax (FBT) implications when planning their holiday celebrations and gifts.

Here’s what you need to know to stay compliant while spreading festive cheer.

Understanding Fringe Benefits Tax

FBT is a tax employers pay on certain benefits they provide to their employees, employees’ families, or associates. Separate from income tax, it can apply to various non-salary perks, including some gifts and celebrations.

Key Guidelines for Benefits

1. Know Your Budget Limits

The magic number is $300 per head for the year- benefits under this threshold are typically FBT-exempt.

Gifts and parties are not assessed separately, meaning you can provide:

A gift worth up to $300 OR
A party costing up to $300 per head OR
Any combination of both adding up to $300 per head per year.

Remember: Unused amounts don’t carry forward to future years.

2. Consider Your Party Location

Holding a holiday event at the office may offer significant FBT advantages. Benefits are likely exempt when:

The event is held on business premises
It takes place on a working day
Only current employees (not associates) attend
Food and drinks are consumed on-site

Pro Tip: Keep accurate attendance records, distinguishing between staff and clients. This information is crucial for tax purposes.

3. Understand Entertainment vs. Gift

Entertainment involves shared experiences (like taking clients to lunch)
Gifts are standalone items (such as a bottle of wine given unopened)

This distinction matters significantly for FBT calculations.

4. Navigate Transport Benefits Carefully

When providing rides home:

Taxi fares from workplace parties to employees’ homes are generally FBT-exempt
For off-site venues:
- Transport from work to venue may be exempt
- Transport from venue to home may attract FBT

Still Confused?

Here’s a quick breakdown of the different considerations:

Essential Record-Keeping

Maintain detailed records of all fringe benefits, this should include documents related to:

The amount you spend on each employee;
When and where the event is held;
The value and type of gifts you provide; and
Who attends – is it just employees, or are partners, clients or suppliers also invited?

Making It Work

While these tax rules may seem complex, they shouldn’t discourage your festive planning. The key is preparation:

Plan events with FBT implications in mind
Keep thorough records from the start
Document your FBT calculations
When in doubt, seek professional advice

Need help navigating the FBT landscape for your holiday celebrations?

Source: Tailored Accounts

Here are five simple and effective ways AI can help your small business thrive.

Be the first to access articles like these and more by subscribing to our newsletter.