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The silly season is upon us.
Not only is it a busy time for business, but it’s also a time when calendars are filled with Christmas events – and expenses can grow.
These expenses may include a staff party as an opportunity to come together and celebrate and gifts to thank people for their efforts during the year.
However, don’t forget about the FBT implications when planning these festive revelries. If you’re astute, you can cut your ATO outgoings.
Christmas parties and gifts are subject to the same FBT rules as other fringe benefits.
Therefore, if your Christmas party and gifts are under $300 and unreasonable to be treated as a fringe benefit, they qualify for minor benefits exemption.
Let’s take a look at the specifics:
Keep costs under $300 per person – If you choose to take your party off premises, for example, to a restaurant or function space, it is FBT exempt, provided the cost of the party is less than $300 per employee. If partners attend, they must be catered for within that $300.
Hold your party on your premises – An on-site Christmas party is FBT exempt, provided it’s on a work day. Importantly, this rule only applies to employees. It doesn’t extend to partners and families. Again, partners and other people would only be exempt within a $300 per employee limit.
Bear in mind that the $300 limit includes everything from food and drink to venue hire and entertainment.
The costs of entertaining clients are not subject to FBT and aren’t income tax deductible.
Christmas employee gifts are exempt from fringe benefits tax, provided you keep the cost of employee presents to less than $300 each.
Fortunately, Christmas gifts or hampers are treated separately from Christmas parties, so you don’t need to worry about keeping within the $300 limit for both.
If you’ve already splurged on your company Christmas party and/or have treated your employees very generously this festive season by going over the $300 limits, you’ll need to lodge and pay the calculated amount of fringe benefits tax.
If your FBT is payable, your Christmas business spending can be claimed as an income tax deduction, and you’re eligible for GST credits.
Importantly, ensure that you lodge your FBT returns even if you are exempt.
If you fail to lodge, you risk attracting unwanted attention from the ATO. As a result, they may launch an investigation into your business activities.
As an employer, you must keep records supporting your liabilities, even if an employee has left.
The fringe benefits tax financial year runs from 1 April to 31 March. Returns need to be lodged by 21 May. If you’re already a Maxim client, we’ll contact you in April about lodging. Our online deadline is 25 June.
Fringe benefits tax is probably the last thing on your mind right now, but by remembering these simple rules, you can save on tax and avoid getting investigated for failing to lodge and pay.
$300 is a pretty reasonable number to work within, so staying under it is a smart financial move.
Do you have questions about your FBT obligations? Contact us today for insights and personalised advice on keeping your tax bill down.
