Editor: If you are planning to provide Christmas gifts to staff this year, it is best to give either a gift voucher or hamper for less than $300, to satisfy the minor benefit exemption. That is $299 or less – gifts of $300 or more will be subject to Fringe Benefits Tax.
Christmas gifts…guidelines and tips
Generally speaking, where the value of a Christmas related gift (e.g., food and drink, and a gift) provided to an employee or family member is <$300, it may be exempt from FBT (subject to certain other conditions).
For the purposes of the $300 minor benefit threshold, the following tips should be considered:
- The $300 threshold is applied separately to each benefit provided to an employee, and/or each benefit provided to a family member (e.g., spouse).
- All benefits provided to an employee or a family member in relation to a Christmas function are no longer grouped when applying the <$300 threshold (i.e., the <$300 threshold is applied separately to each benefit).
However, note that if the minor benefit exemption applies to the provision of entertainment benefits to an employee, no tax deduction can be claimed.
Gifts which ARE NOT considered to be entertainment
These generally include, for example:
- a Christmas hamper, a bottle of whisky, wine, etc.; and
- gift vouchers, a bottle of perfume, flowers, a pen set, etc.
The general FBT and income tax consequences for these gifts are as follows:
- gifts to employees and family members – FBT is payable (except where the minor benefit exemption applies) and a tax deduction is allowed
- gifts to clients, suppliers, etc. – no FBT, and a tax deduction is allowed
Gifts which ARE considered to be entertainment
These generally include, for example:
- tickets to attend a theatre, live play, sporting event, movie or the like; and
- a holiday airline ticket or admission ticket to an amusement centre.
The general FBT and income tax consequences for these gifts are as follows:
- gifts to employees and family members – FBT is payable and a tax deduction is allowed (except where the minor benefit exemption applies); and
- gifts to clients, suppliers, etc. – no FBT and no tax deduction
What about a Christmas Party? Here’s an example…
An employer holds an external Christmas party for employees and their spouses. The cost of food and drink per person is $250, and no other benefits are provided.
Assuming the actual method is adopted:
- for employees attending with their spouse – no FBT is generally payable (i.e., the per head cost is <$300); and
- for employees attending alone – no FBT is generally payable (i.e., the per head cost is <$300).
In either case, no tax deductions will be allowed.
Assuming the 50/50 method is adopted:
- 50% of the total expenditure is subject to FBT and is tax deductible.
Editor: As the FBT rate is 49% and a company tax benefit is 28.5% (for a small business entity) you would be paying more tax if you were to claim a tax deduction under the 50/50 method. So you would be better off not claiming a tax deduction for a Christmas Party at all!
