5 things to remember for a FBT-friendly Christmas
With Christmas only a couple of months away you are probably beginning to think about your office Christmas party and other fun things you do around this time of year. Before you begin planning it is important to think about the Fringe Benefits Tax implications of your festivities. With this in mind, you can have a great celebration without an unforeseen tax bill at the end of it. Here are 5 things you should remember when planning your office Christmas celebration.
1. Remember $300
$300 is the number you should keep in mind for employee gifts if you want them to be exempt from FBT. This is because any gift that costs less than $300 including GST per employee is considered a minor benefit. To be a minor benefit the gift also has to be a one-off, so not one which is regularly provided with similar benefits. Also important to note is that meal entertainment where the employer chooses the 50/50 method to identify meal entertainment will not be FBT exempt.
So, if you are thinking about employee gifts and want to avoid paying FBT on these you can look at gifts below $300 including GST, and avoid any surprises that come after Christmas.
2. Your venue choice can make a difference
It can be a tough choice as to the best venue to host your Christmas party. There are plenty of great locations out of the office, but if you care about which option could be the most tax-effective, that would be your office. If you choose to value the entertainment using the actual method, your Christmas party in the office would generally be exempt from FBT. Food, drinks, and even alcohol would be exempt for FBT under this method with no dollar limit. However, it is important to note that this is for employees only, a fringe benefit may arise if associates are invited and the per-head cost exceeds $300.
Fortunately, an employee’s taxi trip home after the party could also be exempt from FBT if provided from the office.
3. Who are you inviting?
When it comes to the Christmas party you may be surprised to find that inviting partners isn’t necessarily going to push you into FBT territory. The $300 threshold for a minor benefit is actually calculated on a per-head basis, instead of per-employee. This means you could invite your employee’s entire extended family, and as long as the per-head cost doesn’t exceed $300 including GST then you could receive the minor benefits exemption to your employee and the rest of the family.
4. Know the difference between an entertainment and non-entertainment gift
Entertainment and non-entertainment gifts have different rules regarding FBT, so it is important to know the differences between the two. Entertainment gifts are generally things like tickets to theatre, concerts, or sporting events. They can also include movie passes, theme park passes, and other things along those lines. Non-entertainment are your usual Christmas gifts including, gift cards, alcohol, hampers, technology, and more. Generally, non-entertainment gifts under $300 including GST are considered minor benefits and so, are exempt from FBT.
5. Keep track of what you are spending
If you want to keep your Christmas celebrations as tax efficient as possible it is vital that you keep track of your expenses. This is where a great bookkeeper comes in. Your bookkeeper can keep track of your expenses or upcoming expenses on Christmas celebrations and let you know if you are getting close to your $300 threshold. A great bookkeeper integrates perfectly well into your team allowing you to rely on them for this information.
Christmas is a great time for celebrating the year that passed and looking forward to the year to come. Celebrations around this time are good for team bonding and team morale, so it is good to consider celebrating the season with your team. But at the same time, it is understandable that you don’t want to have a huge tax bill by the end of it. So, having a Christmas party that is optimised to be as tax efficient as possible is important. Equally as important is keeping track of these expenses to ensure your business can afford them, and that they remain under the thresholds you have decided upon. If you need help with this, reach out to Link Books.