FBT Implications of Work Christmas Parties and Gifts
Fringe Benefits Tax — What business owners need to know this Christmas
As the festive season approaches, you are likely planning your end-of-year functions and perhaps even thinking about Christmas gifts for valued customers and employees for another year.
During this period, it’s important to understand and be mindful of the implications of Fringe Benefits Tax on gifts and parties, to ensure that your generosity doesn’t cause unwelcome tax consequences for your business.
To help, we have set out the following guidelines to assist you:
Fringe Benefits Tax at Christmas
Christmas Parties
A number of factors determine the application or exemption of Fringe Benefits Tax on your staff Christmas party and associated benefits, including your business type, where and when your function is to be held, your invitees and cost.
Example
If your business is not classified as a ‘tax-exempt body’, then the costs (such as food and drink) associated with Christmas parties are exempt from Fringe Benefits Tax, as long as they are provided on a working day on your business premises and consumed by current employees.
However, if you invite associates, customers or suppliers, Fringe Benefits Tax would then be determined by the per-head cost of the function. And if your event is hosted offsite, a new set of Fringe Benefits Tax implications arise.
Customer Gifts
Gifts to customers are tax deductible and not subject to Fringe Benefits Tax, provided they are a genuine gift e.g. a Christmas hamper or a bottle of wine. If you choose to take a customer out for a Christmas drink instead, your portion of this may be subject to Fringe Benefits Tax.
Staff Gifts
Gifts are a great way to show your employees how appreciative you are of their efforts whilst still attracting a tax deduction for your business. However, it’s important to understand that staff gifts over $300 will be subject to Fringe Benefits Tax.
Further, staff gifts under $300 should be eligible for the minor benefits exemption from Fringe Benefits Tax, but if they are recreational gifts (such as concert, cinema or sports tickets) then no income tax deduction or GST can be claimed.
Understanding the intricacies of Fringe Benefits Tax and the implications of FBT on your Christmas entertaining — gifts and parties — can be challenging. Many of our employees offer skilled and highly experienced advice in all aspects of Fringe Benefits Tax, so please contact your Allan Hall Advisor for specific assistance before planning your Christmas functions and/or staff and customer gifts.