The silly season is back upon us with us all about to enjoy the odd Christmas Party or 3.
In order to ensure you stay on side of the ATO and Fringe Benefits Tax (FBT) here are some tips for minimising unwelcome tax bills come tax time.
- Offsite Christmas functions for your team members will be able to access the Minor Benefits Exemption when it comes to FBT that would otherwise be payable by the employer. The minor benefit exemption will apply where and covers:
- The cost per employee being less than $300 per head in total for the function
- The exemption and minor benefit exemption will also apply to spouses and partners of employees attending the event.
- If you spend more than $300 per head at the function the entire cost of the event will be subject to FBT.
- In addition to offsite functions for your team some businesses will also provide gifts as additional goodwill gesture for Christmas. Again the Minor Benefit Exemption will also apply to these gifts where the value of the gifts is less than $300 per head
- If you run a Christmas Function at your business premises the costs associated with this (such as food and drink) are exempt from FBT as long as they are provided on a working day and consumed by employees of the business on site.
When running events onsite and offsite there are also a few other items to be aware of that will contribute towards the costs and calculation of the minor exemption limits. These items include:
- Taxi fares provided to employees to and from the off-site location of your event will be included in the cost per employee. This is an area many people overlook when calculating costs per head for employees.
- Taxi fares will be exempt if the function is held on site at your business premises
We also remind you that despite your Christmas Party being exempt from FBT it won’t be a deductible expense for income tax purposes, nor will you be able to claim GST in relation to these costs.
When coding these costs in your accounts please allocate these to a separate general ledger expense such as Entertainment – Non Deductible (ensure a GST Exempt code is used) or to Christmas Party (ensure a GST exempt code is used). This way your accountant or bookkeeper can ensure that the Christmas Party costs are dealt with correctly for Income Tax, FBT and GST purposes.
Christmas Gifts to your team members will be deductible expenses to the business and GST credits can be claimed in relation to these expenses.
As you can see the rules around your business Christmas Party and Gifts for team members are confusing and complicated to say the least.
If any further advice is needed please contact one of the experienced advisors at HTA Advisory to discuss matters further.