Just like Santa meticulously sorts out who’s been naughty and who’s been nice, businesses need to stay vigilant with tax regulations while spreading festive joy. Organising holiday parties for employees or clients may incur Fringe Benefits Tax (FBT).
FBT is a tax that employers are responsible for when providing additional benefits to employees, their families, or associates. This tax is distinct from regular income tax and is determined by the benefit’s value. The FBT year extends from 1 April to 31 March, and businesses are required to compute and report any FBT owed. With some thoughtful planning—similar to Santa’s efficient delivery route—you can enjoy the season while keeping tax-related concerns at bay!
FBT Exemption: A Little Holiday Gift from the Tax Office
Among the tax regulations is the “minor benefit exemption”—think of it as a little stocking stuffer. If each employee receives a benefit worth less than $300 and it’s not a recurring benefit, it’s exempt from Fringe Benefits Tax (FBT).
Holiday parties are ideal candidates for this exemption, as they are typically one-off events. Businesses can bypass the FBT complications as long as the per-employee cost remains below $300. Keep in mind that giving perks frequently diminishes the chances of qualifying for this exemption. Fortunately, Christmas only comes once a year!
Christmas Parties at the Office
If you organise your Christmas party at your workplace during a normal working day, expenses like food and beverages are free from FBT, regardless of the amount spent. However, you won’t be able to claim tax deductions or GST credits for these costs.
Should employees bring their family members, and the cost per person stays under $300, FBT remains inapplicable. However, no tax deduction or GST credits will be available. If the individual cost exceeds $300, FBT does apply, but you can claim a tax deduction and GST credits.
FBT Check for Office Christmas Parties
| Who attends | Cost per person | Does FBT apply | Is income tax deduction/Input Tax Credit available? |
| Employees only | Unlimited | No | No |
| Employees and their family | Less than $300 | No | No |
| More than $300 | Yes | Yes | |
| Clients | Unlimited | No | No |
Think of it like this: during your Christmas party, food and drinks are akin to Santa’s gifts—there’s no limit on what employees can enjoy while on business premises. Yet, adding a band or other entertainment can rapidly increase costs, and if the total expense per employee surpasses $300, FBT will kick in. Keep it beneath $300 per person, and you’ll be in the clear.
Christmas Parties Outside the Office
If your Christmas party takes place at an external venue, such as a restaurant or hotel, it’s FBT-free as long as the cost per employee (including their family, if they attend) is under $300. Just remember, tax deductions or GST credits aren’t applicable in this scenario.
FBT will be triggered if costs exceed $300 per person, but you can then claim a tax deduction and GST credits.
Good news: Employers don’t need to pay FBT for taxi rides to and from the workplace due to a special exemption.
FBT Check for External Christmas Parties
| Who attends | Cost per person | Does FBT apply | Is income tax deduction/Input Tax Credit available? |
| Employees only | Less than $300 | No | No |
| Employees and their family | Less than $300 | No | No |
| More than $300 | Yes | Yes | |
| Clients | Unlimited | No | No |
Clients at the Christmas Party
If clients attend your Christmas party, there is no FBT on their related expenses, irrespective of the venue. However, tax deductions or GST credits cannot be claimed for the costs associated with clients.
Christmas Gifts
Many employers take pleasure in gifting their employees during the festive season. If a gift’s value is less than $300 per person, FBT is not applicable, as it’s generally not classified as a fringe benefit.
FBT Check for Christmas Gifts
| Who attends | Cost per person | Does FBT apply | Is income tax deduction/Input Tax Credit available? |
| Entertainment gifts | Less than $300 | No | No |
| More than $300 | Yes | Yes | |
| Non-entertainment gifts | Less than $300 | No | Yes |
| More than $300 | Yes | Yes |
However, keep in mind that FBT may apply if the gift is for entertainment purposes, such as concert tickets, movies, or holidays. Non-entertainment gifts—like gift hampers, vouchers, flowers, or a bottle of wine—typically do not incur FBT under $300. So spread the festive joy, but keep an eye on the tax implications to sidestep any surprises!
