December 2023

Avoid post-party tax hangovers – the complexities of FBT

We've made it simpler for you to remember your company's FBT obligations, so you don't have to worry about being a tax Grinch during the year-end festivities!

There’s no need to fret about being a tax Grinch during the year-end celebrations – we’ve made it easier for you to stay on top of your business’s FBT responsibilities! Tis the season to celebrate, and many companies like to spread the holiday cheer by hosting festive events. But how do you keep it tax-friendly?

The $300 Minor Benefits Rule

  • Your party needs to be held on the premises and during a business day. If your costs are below $300 per head, you won’t incur FBT, but you won’t be able to claim tax deductions or GST credits.

Imagine a Christmas lunch right at your workplace, attended by employees, their partners, and even clients! The company pulls out all the stops, offering delicious food, drinks, and even arranging taxi rides home for everyone.

Now, here’s the good news on the tax front. For employees, the company doesn’t have to worry about Fringe Benefits Tax (FBT) on the provided goodies. Whether it’s the scrumptious lunch, refreshing drinks, or the convenient taxi ride home, these perks are exempt from FBT.

Associates, which include employees’ partners, also get to enjoy these benefits without FBT worries. Since the total value of these benefits is less than $300, it’s considered a minor benefit, and there’s an exemption in place. For clients attending the shindig, the company is in the clear – no FBT on the benefits provided to them.

However, it’s worth noting that while spreading holiday joy is fantastic, the company won’t be able to claim income tax deductions or GST credits for the expenses incurred on the festivities. So, while the holiday spirit is tax-friendly for the employees, associates, and clients, the company won’t get any tax breaks for being the host with the most.

In Summary

If your business holds a Christmas party:

  • on a working day, on your business premises, and only for your current employees, you don’t pay fringe benefits tax (FBT) for the food and drink
  • off your business premises, or the party includes associates of employees (such as their partners), you don’t pay FBT if the party is a minor benefit – that is, the cost for each person is less than $300 and it would be considered unreasonable to treat it as a fringe benefit
  • that includes clients, you don’t pay FBT for the costs relating to the clients.

The end of year is often a cause for celebration for businesses and their employees, but there are a lot of rules and regulations that you need to adhere to to avoid a hefty FBT-related hangover. Make sure to speak with a registered tax professional if you have any questions pertaining to FBT.

Cheers to a tax-friendly and joyous holiday season!

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