? Don’t Let the FBT Grinch Derail Your Holiday Plans ?

As the holiday season approaches, many businesses are preparing to celebrate with their teams. It’s a time for recognition and reflection, but it’s also important to keep an eye on potential Fringe Benefits Tax (FBT) obligations that could significantly increase costs.

The ATO has recently updated its FBT guidance, offering timely advice for employers planning festive events. To ensure your holiday plans run smoothly and stay within budget, here are the key factors to consider:

1?? Guest List: Are celebrations limited to employees, or are partners, clients, or suppliers also attending? The composition of your guest list can impact your FBT obligations.

2?? Cost Per Person: Keeping costs below $300 per head can, in some cases, qualify benefits for minor benefit exemptions, reducing your tax liability.

3?? Location Matters: Hosting events on-site versus off-site can change the FBT treatment of expenses.

4?? Gifts Provided: Non-entertainment gifts (e.g., hampers) are typically more tax-efficient than entertainment-based gifts (e.g., tickets).

?? Gifts: Appreciation with Care

Gifts and gift vouchers are a popular way to show appreciation to your employees during the holidays, but they come with their own FBT considerations:

• If the gift or voucher value is under $300, it could qualify as a minor benefit and may be exempt from FBT. ??
• Once the value hits $300 or more, the FBT Grinch steps in, and the full amount could become taxable.
• Client gifts are not subject to FBT, but if the gift is entertainment in nature, an income tax deduction may not be allowed.

Don’t forget to maintain proper records to ensure compliance and avoid surprises when tax season rolls around.

A Tale of Two Festive Gatherings ??

Take these two companies as examples when looking at End Of Year Holiday parties:

• Company A spent $270 per person on their off-site event: They stayed under the FBT radar—no extra tax here!
• Company B spent $310 per person at the same venue: Their FBT obligations nearly doubled their costs.

Don’t Forget GST and Income Tax

The FBT treatment of benefits also affects income tax deductibility and GST input tax credits (ITC):

• Costs subject to FBT are tax-deductible and may qualify for GST ITC.
• However, costs exempt from FBT are generally not tax-deductible and do not allow for GST ITC.

Being aware of these interactions is an important part of maintaining correct accounting and Business Activity Statement (BAS) records.

?? Holiday Planning Tips:

• Understand the rules: FBT obligations differ based on costs, location, attendees and entertainment methods chosen.
• Maintain clear records: Proper documentation simplifies compliance and minimises risks.
• Seek expert advice: Consulting with a tax professional ensures you make informed, cost-effective decisions.

By carefully planning and understanding your FBT obligations, you can ensure your holiday celebrations remain a time of joy and recognition—not an unexpected financial burden.

?? Cheers to a wonderful holiday season—may your gatherings be joyous and your tax bills kind!