What You Need to Know About Fringe Benefits Tax Before Your EOY Celebration

With summer just around the corner, you may be planning a celebration with your employees. The Australian Taxation Office (ATO) shares what you need to know about parties, gifts and fringe benefits tax.

As the end of the year approaches, you may be thinking about your ‘hair stylist or beautician of the year’ awards, or planning a party with your employees!

Before you replace the combs and tweezers with champagne glasses, make sure you consider the fringe benefits tax (FBT) implications of your celebration – would FBT apply to that party, or that silk pillowcase for the winner of the ‘most likely to have their client fall asleep during a head massage’ award?

If you hold a party:

  • on a working day, on your business premises, and only for your current employees, you don’t pay FBT for the food and drink;
  • off your business premises, or the party includes associates of employees (such as their partners), you don’t pay FBT if the party is a minor benefit – that is, the cost for each person is less than $300 and it would be considered unreasonable to treat it as a fringe benefit.

If you give your employees a gift:

  • your FBT obligation depends on the value and type of gifts you provide;
  • you don’t pay FBT if the gift is a minor benefit.

Example: Party on business premises

Kezia Hair and Beauty holds a canapes and champagne soiree on its business premises on the last working day before the Christmas shutdown:

  • Employees, their partners and VIP clients attend
  • Food and drink, and taxi travel home is provided
  • The cost per head is $125
  • Each employee gets a $300 food and drink gift basket.

Even if the menu served was less fun than nailing winged eyeliner perfectly on the first go, the purpose of the party is for the people attending to enjoy themselves. So the party would be considered entertainment and Kezia Hair and Beauty would need to consider if FBT applies.

FBT doesn’t apply for the:

  • food and drink for employees, because it is provided and consumed on a working day on the business premises
  • taxi travel for the employees, because there is a specific FBT exemption for taxi travel directly to or from the workplace
  • food, drink and taxi travel provided to the employees’ partners, because it is a minor benefit – that is, it has a value of less than $300 and it would be unreasonable to treat it as a fringe benefit
  • VIP clients as there is no FBT on benefits provided to clients.

FBT does apply for the:

  • the $300 food and drink gift basket, because the value is $300 or more – so the minor benefit exemption cannot apply.

Remember, keep all records relating to the benefits you provide, including how you calculated their value.

For more information, including claiming income tax deductions and GST credits, visit Entertainment-related benefits.

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