Christmas is on the way and many employers will be planning their annual year-end “bash”. In addition, many businesses will be considering what gifts, if any, they will provide to clients and employees.
It is important to consider the possible FBT and income tax implications of providing “entertainment” and gifts to staff and clients. FBT tax is an expensive tax that requires you to lodge an FBT return in April/May of each year, and pay FBT tax at an amount roughly equal to the original expenditure – best avoided!
One major consideration is the “less than $300” minor benefit exemption and the fact that the ATO now accepts that different benefits provided at (or about) the same time are not added together when applying this threshold. Basically, this means that a Christmas party and gift may be exempt from FBT, even if provided at the same time, as long as each costs less than $300!
In a Nutshell;
(Assuming you are using the actual method for fringe benefits tax – most small businesses are)
For employees and their associates, provided the cost of each benefit is less than $300 per person;
There is no FBT payable.
Food and drink, recreation (such as a DJ or comedian) and taxi travel is not tax deductible, regardless of whether this is held on business premises or at a venue. Therefore no GST claim is available.
Non-Entertainment Christmas Gifts are tax deductible, and normal GST rules apply. (Note there is no GST on the purchase of store gift cards). Non-entertainment gifts include a Xmas hamper, bottle of whisky, gift card, perfume, flowers, pen set etc. In contrast, entertainment gifts are non-tax deductible and include tickets to a theatre, sporting event, movie, admission ticket etc.
For clients and suppliers
There is no FBT payable
Food and Drink, Recreation and Taxi Travel is not tax deductible nor GST claimable, regardless of location.
Non-Entertainment Gifts are however tax deductible and normal GST rules apply.