Save money on your work Christmas party

Written By: Natalia Atapina

The festive season is one of the tax department’s favourite times of year because tax dollars come from everywhere; even from your business’ Christmas party. Something to be aware of is Fringe Benefits Tax which has a way of taking your party’s budget and throwing it on its head. So how can you minimise the FBT on your next function and what are some of the rules that you may have to consider in regards to entertainment and food provided?

Fringe Benefits Tax
This is a tax employers pay on certain benefits they provide to their employees, employees’ family or their associates. Fringe benefits tax is separate to income tax and is calculated on the taxable value of the fringe benefits provided. The FBT year runs from 1 April to 31 March.

On-site Functions

When providing food and beverages:

  • To your current employees:
    •  You are exempt from FBT on these items.
    • These costs will not be tax deductible
    • No GST imputation taxation credits can be claimed.
  • To associates (including an employee’s spouse):
    • Not exempt from FBT (calculated per head)
    • These costs will be tax deductible
    • GST imputation taxation credits can be claimed on the relevant costs
  • To non-employees (such as clients):
    • You are exempt from FBT on these items
    • These costs will not be tax deductible
    • No GST imputation taxation credits can be claimed

Note:
Should the cost of the function’s food and beverage be below $300 ‘per head’, minor benefits exemption may apply and FBT will not be payable. In this case, no income tax deductions or GST credits will be available.

Off-site Functions
When hosting a function at an off-site venue (such as a restaurant), any costs incurred for employees and associates are subject to FBT. These costs include venue hire, entertainment, food, drink and refreshments. These costs are also tax-deductible for income tax purposes and GST credits can be claimed. However, just like on-site functions, if the costs of food and drink ‘per head’ is below $300, FBT will not apply, costs will not be deductible for income tax purposes and GST credits are not available.

Gifts

  • To employees:
    • If gifts cost over $300 per employee, FBT will be payable on these items
    • Not tax deductible
    • No GST imputation tax credits can be claimed
  • To clients:
    • Exempt from FBT
    • Tax deduction and GST credits are available for gifts such as whisky, wine, hampers etc.
    • No tax deduction and no GST credits can be claimed for gifts such as theatre, movie or sporting event tickets.

 

If you have any questions regarding Christmas benefits provided to employees, associates or clients and the potential fringe benefits tax liability, please don’t hesitate to contact us.


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