Did you know that providing food and drink to your employees, such as a Christmas party, could make you (the employer) liable for Fringe Benefits Tax (FBT)?
FBT is a tax paid by employers, for benefits provided to their employees or family members. This can be applicable for all business types and sizes. The FBT year runs from 1 April to 31 March.
The provision of a Christmas party may attract FBT, however there are a few exemptions.
The costs of a Christmas party are exempt from FBT if they are provided on a working day at your business premises (only applies to current employees, not associates).
If the Christmas party is held off the business premises (such as a restaurant) and the cost of the party is less than $300 per employee, then it may be classed as a minor benefit and exempt from FBT.
If the Christmas party is held off the premises and costs are equal to or more than $300 per head, then it would be subject to FBT. It is important to remember that the cost of providing a Christmas party is income tax deductible only if it is subject to FBT. This means that if it is exempt from FBT, it is not tax deductible. Fringe Benefits Tax doesn’t just apply to Christmas parties, but to all benefits provided to employees such as the provision of a car, meals (food and drink) not consumed at the business premises, food and drink provided whilst travelling, corporate boxes for employees to use, etc.
Confused? We don’t blame you! FBT is a very confusing and complex tax but if you have good record keeping habits, this will help you and your accountant to keep on top of potential FBT liabilities.
If you are unsure whether you are liable for Fringe Benefits Tax, contact your accountant to find out.