By Michael Muaremov, Principal Of Michael Muaremov and Associates
WITH Christmas looming, businesses are in the throws of planning Christmas parties for staff and hosting festive entertainment for clients and suppliers.
Fringe Benefits Tax (FBT) and how it applies to Christmas parties and festive entertaining is of particlar relevance at this time of year.
The provision of entertainment according to the Australian Taxation Office involves providing entertainment by way of food, drink and recreation. It also includes accommodation or travel in connection with an entertainment provided.
A ‘recreation activity’ can be specified as any form of an amusement, sport or other similar leisure-time pursuits.
Providing these benefits to your employees or clients may give rise to a number of different types of fringe benefits, however it depends on the circumstances under which you provide the entertainment.
Christmas functions and gifts
Providing staff with a Christmas function and/or gift is not considered to be a provision of entertainment.
There is no separate FBT category for Christmas parties provided by employers.
However, a fringe benefit provided by you, an associate of your business or under an arrangement with a third party to any current, past or future employees may attract FBT.
Christmas gifts would not be treated as a tax exempt body entertainment benefit instead it would be treated as a minor benefit exemption.
However, it is important that the benefit provided to staff and their associates meet the conditions of the minor benefit exemption rule.
The costs incurred with Christmas parties are exempt from FBT if they are provided on a working day, on a business premises and are consumed by all current employees.
Providing a Christmas party and gift to your staff and their associates may instead be considered as a minor benefit if the benefit provided is less than $300 per employee.
Reporting requirements
Providing food and drinks and expenses associated with hiring or leasing entertainment facilities for your Christmas function are all excluded from fringe benefits for reporting purposes. Therefore, excluded fringe benefits are not reported on employees’ payment
summaries.
Tax deductibility of a Christmas party
The cost incurred when providing a Christmas party is income tax deductible only if the benefit provided is subjected to FBT. Therefore, any other costs that are exempt from FBT and are considered to be an exempt minor benefit (under $300 per employee) cannot be claimed as an income tax deduction.
In short:
* Providing your staff with a Christmas function and or gift is not considered to be a provision of entertainment.
* There is no separate FBT category for Christmas parties provided by employers.
* The costs incurred with Christmas parties are exempt from FBT if they are provided on a working day, on a business premises and are consumed by all current employees.
* Providing a Christmas party and gift to your staff and their associates may instead be considered as a minor benefit if the benefit provided is less than $300 per employee.
* Any other costs that are exempt from FBT and are considered to be an exempt minor benefit cannot be claimed as an income tax deduction.
We would like to take this opportunity to wish all Grow magazine readers, sponsors and team a very merry Christmas and a safe, healthy and prosperous 2017.
– Located in Beaconsfield for over 17 years, Michael Muaremov and Associates is a registered taxation agent.
