David Sofrà and Rick Kimberley point out some considerations for employers in relation to Fringe Benefits Tax (FBT) and the festive season.
As we move into the full swing of the silly season it serves as a timely reminder that there are still opportunities to provide rewarding Christmas parties and gifts to your staff without the tax hangover… where structured effectively.
For employers who value meal entertainment using the ‘actual method’, a Christmas function costing less than $300 per head would generally be exempt from FBT (even where the employee is considered a ‘frequent’ entertainer for meal entertainment purposes). The per head benefit also applies to partners and family.
Separate to this, the provision of gifts valued at less than $300 to employees can be a tax effective way of marking the occasion (when compared to a cash bonus), as the gift should be exempt from FBT whilst a tax deduction and GST credit would also be available. Please note the gift must be less than $300 (inclusive of GST) in order to be exempt, so don’t fall into the trap of providing $300 gift cards to staff!
An important consideration for employers at the conclusion of Christmas festivities is ensuring your employees get home safely. Taxi travel between the employee’s home and workplace is exempt from FBT, however this exemption does not extend to travel between home and an entertainment venue (unless of course you hold the function at your premises on a working day and you value meal entertainment using the actual method).
Another key consideration in today’s age of ride-sharing apps is what is actually considered a taxi for FBT. The definition of ‘taxi’ does not extend to ride-sharing services provided in a vehicle that is not licensed to operate as a taxi. Accordingly, catching an Uber home from the workplace will not automatically be an exempt benefit.
Finally, if you work for a charity or public hospital, the previous uncapped exemption for meal entertainment has been replaced with a $5,000 cap, so think twice before buying the next round!