Does FBT apply to the office Christmas party?

8 October 2018

Implications of your Christmas Party from a FBT perspective

With the festive season fast approaching, employers may begin planning their Christmas party and should be aware of the tax implications of such events.

When an employer provides a non-cash benefit to an employee or an associate of an employee, it may give rise to what is known as ‘Fringe Benefit’ with which Fringe Benefit Tax (FBT) may be payable by the employer.

There are various categories of FBT which cover a wide range of benefits, some of which include the use of company motor vehicles, loans from employer to employee, use of company property and parking on business premises.

This article will focus on the implications of hosting a Christmas party for employees and what needs to be considered.

A rate of 47% will be applied to the taxable value of the non-cash benefit supplied, unless it meets one of the exemptions.

There is no specific ruling in FBT Law that deals Christmas parties, however the FBT Exempt benefits below may be relevant to your function.

• • • • Minor & Infrequent Benefits – if the cost of the function is $300 or less per employee or associate of the employee, there is no FBT implication due. If functions cost less than $300 per person and are not held regularly or frequently, this exemption may apply.
    • • Function held on Business Premises during Business Day – if food and drinks are provided to current employees, on the business premises during a business day, there will be no FBT implication for the employer. If associates of the employee attend and the cost per person exceeds $300, FBT will arise on for the associates but not he employees.
    • • Transport from Function held and Business Premises – related to the above point, if an employer pays for an employee’s taxi ride home from the Christmas party held at the premises, there will be no FBT implication.

Taking into account the points above, there are a few factors to consider from a tax perspective, prior to planning your Christmas party:

• • When
    As Christmas parties normally only occur once a year, this satisfies the infrequent component of the exemption. If the party will cost less than $300 per person, the exemption may apply.

• • Where
    If the party is held on the business premises during a business day to current employees, no FBT will arise.

• • Who
    Different implications apply according to who attends the party, whether its employees, associates of employees or clients.

  Contact the team at Shakespeare on 9321 2111 if you’d like to discuss how these FBT considerations may apply to your business.

   

General disclaimer: Our firm provides the information on this website for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles on this website are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose

.

---