Fringe Benefits Tax – What You Need to Know for the Christmas Period
As Christmas approaches, you are likely to be planning your end of year function and perhaps thinking about Christmas gifts for your valued clients and employees. During this planning stage, it is important to understand and consider the implication of Fringe Benefits Tax on your gifts and parties, to ensure your generosity doesn’t cause unwanted tax consequences for your business.
We have set out the following guidelines to assist you throughout this period.
Fringe Benefits tax at Christmas
A number of factors determine the application or exemption of Fringe Benefits Tax on your staff Christmas party and associated benefits, including: your type of business, where and when your function will be held, who is invited and how much it costs.
For 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. If you invite associates, clients or suppliers however, Fringe Benefits Tax would be then determined by the per head cost of the function. And if you host your event offsite, a new set of Fringe Benefits Tax implications arise.
Gifts to clients 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 client out for a Christmas drink instead, your portion of this may be subject to Fringe Benefits Tax.
Staff gifts are a great way to show your employees how appreciative you are of their hard work whilst still getting a tax deduction for your business. However, it is 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 tickets to a concert, movie or sporting event) then no income tax deduction or GST can be claimed.
Understanding the intricacies of Fringe Benefits Tax implications on gifts and parties can be challenging. Many of our employees are highly experienced and skilled in all aspects of Fringe Benefits Tax, so please contact your Allan Hall Advisor if you would like some advice or assistance when planning your Christmas function, staff gifts or client gifts.