Festive season parties and gifts

To assist your company’s party and gift plans for the festive season – an important issue to consider is the possible Fringe Benefits Tax (FBT) and income tax implications of providing “gifts” and "entertainment" to staff.

One major consideration is the "less than $300" minor benefit FBT exemption and the fact that the Australian Taxation Office now accepts that different benefits provided at (or about) the same time are not added together when applying this threshold.

This means that a “non entertainment” item or gift and an “entertainment item” or party, may be exempt from FBT, even if provided at the same time, as long as each costs less than $300!

“Non entertainment” items or gifts – generally includes things which can be used at any time:

a Christmas hamper, a bottle of whisky, wine, etc; and
gift vouchers, a bottle of perfume, flowers, a pen set, etc.

“Entertainment item” or parties – generally have to be taken up at a specific time:

tickets to attend a theatre, live play, sporting event, movie or the like; holiday airline ticket or admission ticket to an amusement centre; and
party, dinner, lunch or BBQ.

For example if an employer holds an external Christmas party for employees and their spouses on say 4 December and then provides a gift hamper to employees on Christmas Eve:

the cost of food and drink per person is $250, and no other benefits are provided.
the cost of the hamper is $50.

Assuming the actual method is adopted:

for employees attending with their spouse – no FBT is payable (ie, the per head cost is less than $300);
for employees attending alone – no FBT is payable (ie, the per head cost is less than $300); and
for employees receiving the gift hamper – no FBT is payable

FBT is an intricate and complicated issue, and at a rate of 46.5% it can also be a costly issue. To discuss how to avoid paying FBT unnecessarily, talk to your Baker Affleck accountant.