When organising a Christmas party or gifts for your employees, it is worth working out whether the benefits you are providing would be considered entertainment and therefore subject to fringe benefits tax (FBT).

To determine whether FBT will apply, you need to take into account the following factors:

The amount spent on each employee

Where the notional value of the expense is less than $300 per employee, the minor benefit exemption can be applied and FBT will not apply.

When determining the notional value, benefits provided to associates are not included. The $300 threshold will apply separately to each benefit provided, even if they are connected to each other.

For example, if a meal, accommodation and taxi travel are provided, the $300 benefit will apply separately to each of these benefits.

If you provide a gift to your employees, if the value of the gift is less than $300 per person, then FBT may not apply.

When and where the party is held

The time and location of the Christmas party will substantially impact whether FBT is payable. This is particularly the case where alcohol is also being provided.

For example, if the party is held on a workday during work hours and on your business premises and only includes current employees, FBT will not be payable on the food and drink provided.

However, if the party is held offsite and/or includes associates of employees and the value of the benefit provided is greater than $300 per employee then FBT may be payable.

Who attends the party

Where associates of employees attend a function, FBT may be payable if the minor benefit exemption cannot be applied. This may be the case even for functions that are held on business premises.

The value and type of gifts provided

Where you provide gifts to employees that have a notional value of over $300, FBT may be payable on the gift.

Examples of gifts where FBT may be payable include gym memberships, golf days, and holidays (where given as a reward).

Please note: Where FBT is not payable, some of these expenses will also not be tax deductible or eligible for GST credits.

If you have any questions or wish to discuss further, please get in touch with us on 0434 084 635 or email amy@albaccounting.com.au