The ATO reminds taxpayers that, if you’re involved in the administration of fringe benefits tax (FBT) for your organisation, be sure to plan ahead and consider the FBT implications of providing Christmas parties and gifts.
When planning your Christmas party list and checking it twice, consider:
- how much it costs
- where and when it is held – a party held on business premises on a normal work day is treated differently to an event outside of work
- who is invited – is it just for employees, or are partners, clients or suppliers also invited?
Christmas presents or gifts may also attract FBT. You’ll need to consider:
- the amount you spend
- the type of gift – gifts of wine or hampers are treated differently to gifts like tickets to a movie or sporting event
- who you are giving the gift to – there are different rules for employees and clients or suppliers.
Don’t get your tinsel in a tangle this festive season, start planning now for how much FBT you will have to pay on top of the costs of the function and gifts.
Part of the answer is that minor benefits (a ‘nominal benefit’ of less than $300) are exempt benefits, under s58P of the Fringe Benefits Tax Assessment Act 1986 (FBT Act), if it is ‘unreasonable’ to treat it as a ‘fringe benefit’. The Commissioner confirms that Christmas gifts to employees could be exempt under this provision.
The FBT law is complex, however, and I have not attempted to track down all of the complexity surveyed by the Commissioner in his warning about Christmas parties and gifts.
CPD Questions (answers available)
- Could Christmas gifts be exempt ‘minor’ benefits (with a sub-$300 nominal value)?
- Under what provision are such benefits exempt?
- Might the amount of FBT on a Christmas party depend on where the party is (on or off business premises), whether the party is outside business hours, and whether it is only employees, their partners or clients?
- Have I made any attempt to explain the technical basis for these variations (save for the ‘minor benefits’ provision)?