It’s that time of year, where the festive season has us all digging deep into our pockets to give generously to charities and to those around us. While just about every employer puts on a Christmas party or celebration of some sort for their staff, they may be unaware of the potential taxation issues lurking beneath.
Throwing Christmas parties and giving gifts to employees and clients could result in Fringe Benefits Tax (FBT). There are some exemptions to FBT, however, it can be tricky determining what is exempt and what is not.
We look at the top three items employers should consider when planning their Christmas parties and their holiday gift-giving.
The $300 threshold
What employers need to know is $300 per employee is the threshold for what is considered a minor benefit, and minor benefits are often exempt from FBT (although there are some conditions).
One of the first things the tax man will look at is whether your Christmas party is classified as entertainment or non-entertainment. The FBT thresholds are different for parties held on business premises during normal workdays and those that are held outside of work and may include family, colleagues and their spouses. Whichever location employers decide to hold their festive party, they must remember the $300 threshold per person is also one of the things that they need to consider in order to qualify for an FBT exemption.
There’s nothing more satisfying than giving staff and clients a gift they’ll like at Christmas. Keep in mind that even if the gift you give is exempt from FBT, you most likely will not be able to claim it as an income tax deduction or claim any GST credits for the gift. Depending on the type of gift given (e.g. movie tickets, concerts tickets, hampers, vouchers), will determine whether an FBT exemption applies or not. While cash bonuses are fantastic to receive as employees, the employer must consider potential PAYGW and Superannuation Guarantee obligations that may result.
It’s not always easy to navigate through the detail of FBT, but it is something that’s important for employers to be aware of, especially at this time of year. The experts at Halpin Partners are more than happy to talk you through the FBT laws and assist you with understanding any potential tax costs with your upcoming Christmas parties/gifts.