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Festive Season v FBT Posted on November 22, 2019
December in the office is always fun. It is peak time for fringe benefits like Christmas parties and staff gifts that help the team to feel valued and part of something important. There are a few things you can do to make sure the festive season doesn’t become a Fringe Benefits Tax (FBT) headache in the New Year.
- Know what’s in and what’s out. Christmas parties and gifts are in, for example, super contributions are out.
- Log it now. The ‘FBT year’ is different to the financial year (1 April to 31 March), and employers must self-assess FBT liability before the end of Quarter 1. If you know what your FBT liabilities are for December, you can get ahead of the game by calculating it now. Calculation is not a straightforward process. The taxable value varies depending on the fringe benefit, it is dependent on GST credits and there are 2 types of gross-up rates. We recommend simply recording details of the item, the cost of the item GST inclusive, and the numbers of staff and non-staff. This will reduce your retrospective self-assessment. It is very beneficial to have the support of your accountant through this process.
- If you are a non-profit organisation, understand the concessions, particularly in relation to entertainment because this has recently changed.
Christmas parties specifically are an ‘entertainment’ expenditure. This has FBT, income tax and GST implications. The definition of ‘entertainment’ relates to food, drink or recreation; or accommodation or travel to do with providing entertainment by way of food, drink or recreation. Special valuation methods are applied to meal entertainment versus recreation. Meal entertainment is subject to FBT, but within that there are types – morning tea or birthday cake is NOT meal entertainment, breakfast, lunch or dinner is.
FBT is a complex and layered tax. With the increased audit activity by the ATO, it is critical to get it right. Don’t let it get in the way of your fun. Contact our in-house FBT experts for more information.