After a long year, I'd like to take my employees out for a Christmas party and give them a gift, however, I've heard that fringe benefits tax may apply to hosting a Christmas party. What is fringe benefits tax, and will I have to pay it?
Fringe Benefits Tax is a tax that employers are required to pay when they provide non-cash benefits to employees, their family and associates.
Common non-cash benefits can include cars, gift cards provided to employees, and staff events such as Christmas parties.
However, there are some exemptions from paying FBT on benefits provided to employees, which you may be eligible for in respect of your Christmas party.
If the Christmas party is held offsite and the cost per head at the venue is less than $300, it will be considered a 'minor benefit', so FBT will not apply.
However, if the cost per head for the Christmas party function is greater than $300, you will need to pay FBT.
If you're planning on inviting family members to the party, they are included in calculating the $300 per head threshold.
For example, let's assume you invite 10 employees and their partners (20 people altogether), and dinner at the restaurant comes to $4500.
The cost per head will be $225, so you won't need to pay FBT.
If you decide to have your Christmas party at your business premises on a business day, it will be considered an 'exempt property benefit' and there will be no FBT payable.
This only applies to current employees, so if you're inviting family members of the employees, you will have to calculate the cost per head of the family members to determine if you need to pay FBT for them.
FBT will not apply to any clients or suppliers invited to your Christmas party as they are not your employee.
The gift you are looking to provide to your staff has its own $300 threshold.
Therefore, as long as the gift for each employee costs under $300, it will be exempt from FBT.
If your Christmas party or gifts are exempt from FBT, this means you can't claim a tax deduction in respect of them.
However, if you are required to pay FBT, you will be able to also claim a tax deduction.
Contact your tax adviser or the Findex team at albury@findex.com.au to learn more about fringe benefits tax or other taxation issues.
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