RSM Australia

Don’t let taxes spoil your Christmas

Tax Insights

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With the silly season around the corner now is the time to start planning for the upcoming festivities. But don’t let the tax office dampen your spirits, celebrate Christmas whilst minimising your fringe benefits tax for a tax-hangover-free night.

The Christmas party

The provision of entertainment by way of food and drink provided to employees and their associates are considered fringe benefits and may be subject to FBT.

Consider the following options:

  • hold the Christmas party on the business premises on a working day: the provision of food and drink to employees may be exempt for FBT purposes. However, provision of food and drink provided to an employee’s associate may still be subject to FBT where the value of the benefit is more than $300 (including GST) per associate.
  • celebrate Christmas off-premises: the benefit provided to employees and their associates may be exempt from FBT if the cost of the party, including any taxi travel between the venue and home, is less than $300 (including GST) per employee (and their spouse).

The Christmas gift

Employers sometimes like to give Christmas presents to staff as a gesture of thanks for their contribution during the year. These gifts may be subject to FBT which effectively doubles the cost of the gift to employees.

Consider minimising FBT by providing the following gifts:

  1. minor benefits: provide employees with a gift where the value is less than $300 (including GST). If this gift is also 'irregular and infrequent', it may be exempt for FBT purposes!
  2. otherwise deductible gifts: if the gift is one that would have been otherwise deductible, that is, an income tax deduction would’ve been available to the employee personally, this benefit may be exempt from FBT. For example, providing employees with work-related seminars and/or professional memberships/subscriptions.
  3. work-related exempt item: exempt items such as portable electronic devices, tools of trade and/or protective clothing may be exempt from FBT if the item is primarily for business use. A maximum of one item per FBT year can be provided to an employee.
  4. cash bonus: cash bonuses are not considered to be a fringe benefit and therefore exempt from FBT. It is the employee who would pay income tax on the bonus.

Record keeping

You should record information relating to the benefit provided including:

  • the date the benefits provided
  • who is the recipient of the gift (employee, associate or another person)?
  • cost of the benefit
  • if the benefit is entertainment, what kind of entertainment is provided and where was it provided?

If you wish to obtain further information in relation to any of the above, please contact one of our offices.

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