FBT and Christmas benefits
 One
of the areas that can cause confusion at a time of year when there is
already enough going on is that of the fringe benefits tax (FBT)
implications of providing Christmas parties and benefits for employees and
associates. The following information applies to organisations that are not
tax-exempt and do not use either the 50-50 split or the 12 week register
method for meal entertainment.
Exempt property benefits
The costs (such as food and drink) associated with Christmas parties are
exempt from FBT if they are provided on a work day on the employer’s
business premises and consumed by current employees. A fringe benefit will
arise for associates.
Exempt minor benefits
A Christmas party may be a minor benefit, which is a fringe benefit that
costs less than $100 per employee and is provided irregularly. Other party
costs such as the costs of employees’ associates attending the party, gifts,
hampers etc. must all be factored into the $100 per employee.
Tax deductibility
The cost of providing a Christmas party is income tax deductible only to
the extent that it is subject to FBT. Therefore, any meal entertainment
costs that are exempt from FBT (i.e. exempt minor benefits and exempt
property benefits) cannot be claimed as an income tax deduction. However,
the cost of other minor benefits such as gifts would generally be tax
deductible.
Implications for Tax Exempt Bodies
The exemption of property benefits and minor benefits also applies to
not-for-profit organisations. The only exception is that minor benefits that
are in the nature of entertainment are taxable. Accordingly, the following
rules apply.
Christmas gifts
A Christmas gift or hamper to an employee that meets the conditions of
the minor exemption rule and is less than $100 will not attract FBT.
Christmas party held on business premises
The exempt property benefits provisions would not apply as these can
generally only be used by organisations that are not tax-exempt (with
limited exceptions). The minor benefits exemption rule is unlikely to apply
to any staff Christmas party provided by a tax-exempt body.
Christmas party held off business premises
The minor benefits exemption rule will not apply to any staff Christmas
party provided by a tax-exempt body.
Published : 5 September 2005
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