Workplace Christmas parties are subject to the Fringe Benefits Tax (FBT). The purpose of this article is to help you host a FBT-free Christmas celebration by meeting the criteria of Exemptions. FBT is the tax applied to benefits that employees receive outside of their regular wage which includes ‘entertainment.’ Christmas parties are categorised as ‘Entertainment’ which includes: food, drink, recreation and associated accommodation and transport costs.
The best way to avoid the FBT when hosting your Christmas Party is to make sure that your expenditures meet the criteria of one of the following Benefit Exemptions.
2 Benefit Exemptions you need to know about
The 2 benefit exemptions are:
- Property Benefits Exemption: property benefits are provided when property (i.e. food and drink) is provided to your employee. These benefits must both be provided and consumed on a working day on your premises.
This exemption applies to you if you host the Christmas party at your workplace during the working week.
- Minor Benefits Exemption: the taxable value of the benefits must be less than $300.
This exemption applies to your workplace if (a) benefits are not be considered a ‘reward’ for being an employee and (b) benefits are considered ‘irregular’
We have also outlined the Benefit Exemptions you are eligible to receive when your party is located at different locations. We have also included the tax implications of different types of attendees at these given locations.
| LOCATION: AT YOUR WORKPLACE | |
| TYPE OF ATTENDEES… |
FBT APPLICATION
|
| Only current employees attend | Exempt from FBT because property benefit exemption applies |
| Current employees and associates attend
(costs < $300 per head) |
Employees Exempt from FBT because property benefit exemption still applies
Associates are exempt because minor benefit exemption applies |
| Current employees and associates attend
(costs > $300 per head) |
Employees Exempt from FBT because property benefit exemption still applies
Associates are not exempt from FBT because minor benefit exemption does not apply |
| LOCATION: AT A VENUE | |
|
TYPE OF ATTENDEES… |
FBT APPLICATION |
| Only current employees attend | Exempt from FBT because minor benefit exemption applies |
| Current employees and associates attend
(costs < $300 per head) |
Employees and associates exempt from FBT because minor benefit exemption applies |
| Current employees and associates attend
(costs > $300 per head) |
Employees will incur a FBT
Associates will incur a FBT |
What about Christmas gifts?
Gifts to employees are subject to FBT unless they are counted as ‘Minor Benefits’ (see above for details).
Gifts to non-employees (such as clients) are not subject to FBT. A tax deduction and GST credits are usually given if gifts are not considered excessive. An income tax deduction may be allowed if the gift is classified as non-entertainment (e.g. Christmas hamper, alcohol, and perfume); however, this income tax deduction is not allowed if it is a non-entertainment gift (e.g. tickets to an event, holiday accommodation).
These Exemption Benefits are a great example of one of the many ways you can make savings as a small business that we are able to assist you with. The criteria for such Benefits can be complicated so we encourage you to seek our professional advice when you entertain your employees and non-employees
If you have any questions regarding Fringe Benefits Taxation and how your company can make sure that you’re on top of everything this holiday season – please don’t hesitate to get in touch with the team at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
