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December 16, 2016
Fringe Benfits Tax (FBT) and Christmas parties

IT’S THAT FESTIVE TIME OF YEAR WHEN BUSINESS OWNERS ARE PLANNING THEIR CHRISTMAS CELEBRATIONS FOR THEIR STAFF. WHILE IT IS IMPORTANT TO TAKE THE TIME TO CELEBRATE THIS SEASON, IT PAYS TO BE AWARE OF THE TAX IMPLICATIONS OF SUCH CELEBRATIONS.

IT IS LIKELY THAT YOU ARE CELEBRATING WITH YOUR CLIENTS AND EMPLOYEES AND THAT YOUR BUSINESS IS FOOTING THE BILL FOR THESE EXPENSES IN THE FORM OF GIFTS AND CHRISTMAS PARTIES.

Many business owners believe that these expenses are tax deductible.Unfortunately they aren’t and more importantly they could actually cost you more if you get caught by fringe benefits tax.

Fringe Benefits Tax (FBT) applies where an employer provides a benefit to an employee other than their regular salary or wage.

At first instance a Christmas party could be considered such a benefit, depending on the circumstances of the party. However, the Christmas party could be exempt from FBT if its value is less than $300 per employee.

These tables provide general information regarding the different types of Christmas parties that may be held and the FBT implications for such parties.
Should you have specific questions regarding your circumstances or require further clarification around anything to do with FBT feel free to contact your Momentum Financial Group advisor.

CHRISTMAS PARTY HELD ON THE BUSINESS PREMISES, EXAMPLE

Your business decides to have a party on its premises on a working day before Christmas and youprovide food, beer and wine.The implications would be as follows:

If Then
Current employees only attend

For employees – there is no FBT implications as it is an exempt property benefit. There is no tax deduction and no GST claimable

Current employees and their family attend at a cost of less than $300 per head (GST inclusive)

For family – there will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable.

Current employees, their family and clients attend at a cost of $300 or more per head (GST inclusive)

For employees – there is no FBT implications as it is an exempt property benefit. There is no tax deduction and no GST claimable.

For family – a taxable fringe benefit ariseswhere the value is $300 or more.

For clients – considered entertainment however no FBT implications but no income tax deduction either and no GST claimable.

   

CHRISTMAS PARTY HELD OFF THE BUSINESS PREMISES, EXAMPLE

You decide to hold your Christmas function at a restaurant on a working day before Christmas and provide meals, drinks and entertainment.

The implications would be as follows:

If Then

Current employees only attend at a cost of less than $300 per head (GST inclusive)

There will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable.

Current employees and their family attend at a cost of less than $300 per head (GST inclusive)

For employees – there will be no FBT implications as it is an exempt property benefit. There is no tax deduction and no GST claimable.

For family – there will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable.

For clients – considered entertainment however no FBT implications but no income tax deduction either and no GST claimable.

Current employees, their family and clients attend at a cost of $300 or more per head (GST inclusive)

For employees – a taxable fringe benefit arises where the value is $300 or more.

For family – a taxable fringe benefit arises where the value is $300 or more.

For clients – considered entertainment however no FBT implications but no income tax deduction either and no GST claimable.




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