Tax for Christmas?

So, you’re looking to purchase a few staff gifts for the holiday season and perhaps throw a small party in honour of the silly season after yet another, anything but silly year?

It’s best you’re equipped with the information that you need to know what kind of attention you’re going to attract with these thoughtful actions. The taxman can be awfully interested in such behaviour, so how can you tell if gifts and celebrations are exempt from Fringe Benefits Tax (FBT) or not?

Your Christmas Party:

In certain situations, you can enjoy the cost of a Christmas party held for staff and their partners exempt from FBT. As long as this is one of the few celebrations you host each year and the cost per head is kept below $300. 

You can use the ‘actual method’ to determine the value of any meal entertainment FBT. Under this method, you pay FBT for all taxable meal entertainment for staff and their partners, but not to clients, contractors or suppliers, unless there is an exemption. 

An exemption may apply should requirements be met for the minor benefit exemption. Generally, if the value is less than $300 per head and similar or identical benefits are provided infrequently throughout the year, then you’re going to be exempt. The likelihood of this increases the less regular and frequent such occasions may be. 

There is the less common 50/50 method that you can elect to use which does mean the minor benefit exemption will not be available. Instead, you pay FBT on only 50% of all meal entertainment to staff and their partners and clients, suppliers and contractors, regardless of the cost.

When using the 50/50 method, you can only claim 50% income tax deduction and 50% GST credits on the meal entertainment.

The Gifts:

Regarding gifts to your employees, if it is given at Christmas time and costs less than $300, then the minor benefits exemption may be available to exempt FBT. This is separate from the meal entertainment threshold used for an additional Christmas party.

If you would appreciate some clarification and support on this matter or have any other questions regarding tax benefits or business finance, then get in touch with one of our experienced and knowledgeable team members here at YBM who can ensure that you are making the most of the available opportunities for your business. 

Call our Orange office on 02 6362 1533 or our Molong office on 02 6366 8049 today!

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