Planning a Christmas Party? Consider the FBT consequences
With Christmas less than two months away, most business will be busily planning their annual Christmas party. And whilst it might be a great chance to celebrate in style, it is important to consider the Fringe Benefits Tax (FBT) implications of providing a Christmas party or gifts to employees.
ENTERTAINMENT EXEMPTIONS FROM FBT
Entertainment up to the value of $300 for each employee is generally exempt from FBT under the "minor benefits" rule. This means you can potentially avoid FBT where the cost is less than $300 per head, regardless of whether the function is held on business premises or not.
ARE TAXI FARES EXEMPT FROM FBT?
If you are providing taxi fares to and from the party, then the cost of these fares is exempt if the party is held on business premises. If held off premises, then they are included as part of the $300 cost per head limit.
Interestingly, since the "minor benefits" rule applies to each benefit provided, you could potentially provide a party and a gift as long as both are less than $300 each.
But remember that if a benefit is exempt from FBT, you cannot claim a tax deduction or GST credits on the supply.
WHEN IS THE FBT "MINOR BENEFITS" EXEMPTION AVAILABLE?
The "minor benefits" exemption is only available where you are using the "actual" method for FBT purposes. If you are using the "12 week register" or "50/50 split" method, then different rules apply.
Fringe Benefits Tax is an extremely complex area. Please contact KK Partners for an assessment of you proposed expenditure on your Christmas party.