Fringe Benefits Tax and Christmas Parties
As the festive season approaches, many of you will have organised office parties or gifts for your employees to celebrate the year coming to an end. However it isn’t all fun and joy, with the ATO requiring you to consider the Fringe Benefits Tax (FBT) implications of such events.
There are two main methods for determining the FBT costs – the ‘50/50’ and ‘Actual’ methods. Note the same methodology must be used for meal entertainment benefits throughout an entire year.
For food and drinks provided, FBT is payable on 50% of the total expenditure. The 50/50 method provides significant compliance savings but may result in more tax due to certain exemptions not being available (e.g. minor benefit exemption (“MBE”)).
The actual method requires significantly more time to maintain the required records, but may result in less tax being payable. The actual rules contain complexity but can be broadly explained as follows:
Christmas party on the business premises - on a working day before Christmas:
Christmas party held off the business premises - on a working day before Christmas:
Christmas Gifts – this depends on the type of gift and recipient:
Should you have any questions on FBT or want to undertake a review of whether 50/50 or actual methods are preferential please contact your relevant ESV engagement partner on (02) 9283 1666.
Article by Sylvia Choi