Christmas can present a tax headache in the New Year if you're not aware of the Fringe Benefits Tax (FBT) implications of your Christmas celebrations.
FBT is a complex area that has many variables depending on the way your business 'entertains' throughout the year. Here are our top tips to help you through the festive season:
- Gift giving without the FBT Grinch – Steer clear of 'entertaining' gifts
Thinking of giving your employees a gift this year? By providing a 'non-entertainment' gift costing less than $300 you can qualify for a tax deduction, GST credit and have no FBT payable.
So steer clear from gifts that provide entertainment – where they include items of 'recreation' such as tickets to a musical, theatre, live play, movie, sporting events, or providing a holiday – as these aren't tax deductible. Click here for some inspiration!
- Consider your clients
Unfortunately, entertaining clients at Christmas time is not tax deductible. Rather than that long lunch, give a gift instead. A gift to a client is deductible as long as the gift is given with the expectation that the business could benefit (eg giving the gift with the expectation of generating revenue).
- Having a Christmas Party? Best to stick to a budget
The idea of a Christmas party may seem a good idea – but unless the cost per employee is less than $300 – you will fall subject to FBT.
By keeping it under $300 per employee, subject to your entertaining history, it may fall within the 'minor benefit' exemption – which is an exemption to FBT that allows minor benefits to be provided on an infrequent or irregular basis.
It's a complex area of tax that can quickly escalate the cost of Christmas parties and gift giving! We’ve created a Coding Cheat Sheet you can use to help determine what is and isn’t subject to FBT all year round, but if you’re in doubt or have any questions, we encourage you to email or phone us (3233 6400) with your specific query.
Enter your details below to access the Entertainment Coding Guide.
The articles, templates, and media posted on this blog do not give business, accounting, taxation or financial planning advice and should not be relied upon as such. The articles are intended to provide information in a summary form and are general in nature. Formal business, accounting, taxation or financial planning advice should be sought in particular matters. O'Connells OBM Pty Ltd accepts no liability in respect of this information and any person acting solely on the information contained within does so entirely at their own risk.