Christmas can be a tricky time for business owners. From managing cash flow to arranging safe, fun Christmas parties for staff, there are many hidden perils and here’s another … Fringe Benefits Tax on gifts or parties for staff and customers.
Fringe Benefits Tax (FBT) & Christmas Parties
Fringe Benefits Tax (FBT) is incurred when employers provide non-work related benefits to their staff, family members of staff and other associates of the business. It’s paid by the employer and is calculated according to the taxable value of the fringe benefit.
But you can avoid incurring FBT on your staff Christmas party in certain circumstances. For example:
- If you have a fully catered party at your business premises on a work day for current employees only, you won’t pay FBT for the food and drink.
- If you hold your Christmas party at a restaurant or venue with a cost of less than $300 per head, it will also be exempt from FBT – even if staff are allowed to bring partners.
- Christmas parties for customers are also FBT exempt.
- You can’t claim an income tax deduction or GST credits for food and drink provided at staff or customer Christmas parties.
- If you frequently hold staff parties (that is, at least 10 times per year), then your staff Christmas party may incur FBT regardless of the cost per head.
Fringe Benefits Tax (FBT) & Christmas Gifts
Customer gifts are tax deductible as long as they are a genuine gift. Taking them out to lunch, dinner or for drinks could incur FBT on your portion of the bill.
Staff gifts must be under $300 to be FBT exempt. However, you won’t be able to claim them as a tax deduction or claim any GST credits if the gifts are recreational such as movie tickets, theme parks visits or holidays.
No-one wants to pay extra tax at Christmas
The biggest problem with Fringe Benefits Tax is its complexity. So before you spend big this Christmas on gifts and parties for staff or customers, get advice from us. We’ll help you keep your FBT obligations on the NICE side of Santa’s list.