09 December 2024

The Festive Season is here – It is time for employers to consider the Fringe Benefits Tax (FBT) and other tax consequences of Christmas functions and gifts.

Many employers are celebrating by providing Christmas functions and gifts to their employees and clients.

Putting on a Christmas function is classified as an entertainment benefit for tax purposes, and the location of the function as well as the method used to value the benefit are key considerations in determining the FBT implications of the event. The FBT treatment also affects the income tax and GST implications.

This is a timely reminder of the FBT, income tax and GST implications associated with these benefits and some tips to assist in recording the benefits and reducing the FBT cost.

Tips

In order to reduce FBT costs in relation to Christmas functions, employers should consider:

1. Using the ‘actual method’ for determining the taxable benefits for FBT purposes, as the minor benefits exemption and property on a work day exemption are available under this method.
2. If the function is to be held on business premises and associates of employees will also attend, capping the cost per head of the event to less than $300 (including GST). Otherwise, FBT will be payable on the cost per head for each associate.
3. If the function is to be held off business premises, capping the cost per head to less than $300 (including GST).
4.  Factoring estimated taxi (and Uber) costs for employees into the overall event costs where it is the intention to pay or reimburse the cost of taxi travel to and from the event if the taxi travel does not start or end at the workplace.
5.  Providing gifts to employees with a cost of less than $300 (including GST) per person.
6.  Where an employee does not meet the minor benefits exemption as entertainment benefits are provided to them frequently, it may be reasonable to treat the Christmas function as a separate benefit which is not counted towards the other frequent benefits (such as lunches and dinners throughout the year).

The classification of benefits provided to employees can be complicated and ensuring amounts are coded to the correct account at the time of data entry is important. Trying to determine overall cost of benefits and who attended events six months down the track can be difficult if not impossible.

Summary of FBT, Income tax and GST Implications

Next steps

If you would like further information on FBT, employment taxes or assistance with your FBT obligations, please contact our FBT Team.

This newsletter is current as of 09 December 2024, however, please note that announcements and changes are being made by the Government and the ATO regularly.  Before acting upon the content of this newsletter, please contact us to discuss how the above applies to your specific circumstances.