The holiday season is here—a time for spreading cheer, showing appreciation to your team, and celebrating a year of hard work. But before you dive into planning your festivities, there’s one thing to keep in mind: the tax implications of your holiday perks.
To keep the festive spirit intact without getting tangled in unexpected tax costs, let’s talk about how to navigate Fringe Benefits Tax (FBT) this Christmas.
What Is Fringe Benefits Tax (FBT)?
FBT is a tax on non-salary benefits provided to employees or their families. While your team’s salaries and wages are FBT-free, those thoughtful extras—like Christmas parties, gifts, or event transport—might not be.
The good news? With some careful planning, you can reward your employees without the headache of unnecessary tax bills.
Common Christmas Benefits That Can Trigger FBT
1. Christmas Parties
Hosting a Christmas party? The location, costs, and who attends all play a role in determining your FBT obligations.
On-Site Parties: Held during a workday at your office, on-site parties often avoid FBT on food and drink for employees, thanks to the property benefits exemption.
Heads Up: If family members attend and their costs exceed $300, FBT may apply.
Off-Site Parties:
Minor Benefits Exemption: If the cost per person is under $300, FBT can be avoided.
Over $300? You’ll need to navigate specific exemptions to avoid tax liability.
Pro Tip: Choose your calculation method carefully (Actual, 50/50, or 12-Week Register) to minimise your tax exposure.
2. Christmas Gifts
Holiday gifts are a great way to show appreciation, but the tax treatment depends on the type of gift:
Non-Entertainment Gifts: Think hampers, wine, or gift cards. If under $300, they’re FBT-exempt, tax-deductible, and GST-claimable.
Entertainment Gifts: Tickets to concerts or sporting events? While under $300 they avoid FBT, they aren’t tax-deductible, and GST credits can’t be claimed.
3. Transport Costs
Providing transport for Christmas parties? Here’s how FBT plays out:
On-Site Parties: Transport costs (like taxis) are FBT-exempt.
Off-Site Parties: Transport costs count toward the total entertainment benefit, so if the combined cost exceeds $300 per person, FBT may apply.
4. Recreation Days or Corporate Events
If you’re planning activities like golf days or cruises, these are considered entertainment benefits. If costs exceed $300 per person, FBT could apply unless exemptions are met.
The Minor Benefits Exemption: Your Festive Season Hero
The minor benefits exemption can significantly reduce your FBT liability. To qualify:
The cost must be less than $300 per person.
The benefit must be infrequent and irregular.
Example:
Christmas party: $250 per person = Exempt.
Employee gift: $100 = Exempt.
Both individually qualify if you use the actual method.
FBT Planning Tips for a Tax-Smart Christmas
🎄 1. Track Every Cost: Keep a detailed log of all expenses, including food, transport, and entertainment.
📋 2. Maintain Clear Records: Proper documentation is essential for calculating exemptions and ensuring compliance.
🎁 3. Opt for Non-Entertainment Gifts: Hampers and vouchers are often the best way to spread cheer without triggering FBT.
👩💼 4. Consult a Tax Expert: FBT rules can be tricky—an experienced accountant can help you maximize exemptions and avoid costly mistakes.
Celebrate With Confidence
Rewarding your employees this Christmas doesn’t have to come with financial stress. With a little planning, you can keep your team happy, the taxman content, and your festive season joyful.
Need tailored advice for your business? Get in touch today to ensure your Christmas perks are FBT-smart and stress-free.
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