The festive season is a time of joy and celebration for most, and Australian businesses often like to reward their employees through Christmas gifts or parties. However, it’s essential for employers to be aware of the Fringe Benefits Tax (FBT) implications associated with these seasonal perks.
Christmas party planning
When it comes to Christmas parties, employers need to be mindful of the venue, cost per attendee, and the frequency of such events. The provision of food, entertainment, and gifts during a Christmas party may attract FBT if the cost exceeds a certain threshold.
If the party is held on the employer’s premises and the cost is less than $300 per employee (including associates), FBT is generally exempt. However, if the celebration is hosted at an external venue, employers need to pay attention to the cost per employee, as FBT may apply.
Additionally, it’s crucial to consider the frequency of similar events throughout the year. If multiple functions are organised, the costs may accumulate, potentially reaching the FBT threshold.
In summary, when planning an employee Christmas party, employers should review the cost as well as where and when it is held. A party held on work premises on a regular work day is treated differently to an event outside of work.
| If | Then |
| A Christmas party is held on work premises on a working day for employees | There is no FBT implication as it is an exempt property benefit.
There is no tax deduction and no GST claimable. |
| A Christmas party is held outside of work premises for employees | Where the cost is less than $300 including GST per head, the party may be exempt from FBT under the minor and infrequent rule.
There is no tax deduction and no GST claimable.
For parties where the cost is more than $300 including GST per head, it is subject to FBT. However, the cost of the party is tax deductible and GST is claimable. |
Christmas gifting
Christmas presents may also attract FBT. Employers should consider the value of the gift; the type of gift (entertainment or non-entertainment) and who the gift is given to.
There is a specific exemption for non-cash gifts that are considered ‘minor’ or ‘infrequent.’ A gift is generally considered minor if its value is less than $300 (inclusive of GST) and infrequent if it is not provided more than once a year.
For example, if a company decides to distribute hampers, vouchers, or other non-cash gifts to employees, as long as the value per employee is less than $300, FBT is typically not applicable. This exemption allows businesses to spread the holiday cheer without incurring additional tax liabilities.
The impacts of gift giving from a tax perspective are outlined in the following table.
| Type of gift | Gifts to employees | Gifts to non-employees (clients, suppliers, contractors etc) |
| Non-entertainment gifts
E.g. gift hamper, wine, perfume, gift vouchers |
Subject to FBT (unless the minor benefits exemption applies) and tax deductible.
To be exempt minor benefit the total cost of a gift must be less than $300 including GST. |
No FBT applies.
Income tax deduction and GST input tax credits can generally be claimed..
|
| Entertainment gifts
E.g. movie tickets, sporting event tickets, hotel accommodation |
Subject to FBT unless the minor benefits exemption applies, income tax deductible.
The gift cost must be less than $300 including GST.
If the gift is FBT exempt due to the minor benefits exemption, no income tax deduction and no GST credit can be claimed. |
Not subject to FBT.
No income tax deduction can be claimed.
GST input tax credits cannot be claimed. |
Where a gift is provided at a Christmas party, both items are considered separate benefits and may both be exempt as minor benefits.
While it’s important to take the time to celebrate the season and recognise employees for their contributions, there may also be a potential tax impact of such celebrations.
Learn More
By planning ahead and considering the points above, you and your staff can enjoy the holiday season, and avoid any unwanted FBT surprises in the New Year. For assistance with your FBT or other tax and accounting needs, contact Angela Stavropoulos or Kristy Baxter from Pilot’s Medico team on 07 3023 1300 or taxmed@pilotpartners.com.au.