Have an FBT Exempt Christmas

Christmas is meant to be a time of goodwill and giving. If you don’t follow a couple of simple rules, it could mean you’re giving to the ATO as well. 

Falling outside the rules for Fringe Benefits Tax exemptions, means additional tax can be payable on the gifts and Christmas party.

Why do want an FBT free Christmas – Example

The business spends $3,000 including GST, on non-exempt gifts and entertainment.
Calculation of FBT tax: $3,000 x 2.0802 x 47% = $2,993.08
The cost of Christmas with FBT just went from $3,000 to $5,721, ($3,000 – $272(GST) + $2,993).

FBT relief available for Christmas

• FBT does not apply to clients, just past, present and future employees, their families, Directors and beneficiaries of trusts who work in the business.
  
  
• FBT does not apply to food and drink provided to current employees on the work premises on a normal work day.
  
  
• The minor benefit exemption can be used for food, drinks and gifts. Gifts need to be under $300 including GST for each person and the total cost of entertainment needs to be under $300 including GST per person averaged (food drinks and entertainment). To increase your protection you should keep a record of who attended the event.
  
  
• Costs of a single taxi trip where the start or end point are the pace of business. For example, the business closed early and employees went to a restaurant cross town and then went home after the meal. The trip from the work place to the restaurant is FBT exempt but the trip from the restaurant to home would have GST applied.
  
  
• Alternative – pay a taxable travel allowance in the employee’s payroll for the taxi. This covers the cost of the taxi of the employee, the ATO is paid a smaller amount of income tax through the payroll system from the additional amount in the employee wages and the FBT regime is bypassed completely. This is the cheapest and simplest method for the business to pay for non-exempt travel.

Other taxes

Income tax deductions and GST can be claimed on all these expenses when FBT is paid on them. 

When FBT exemptions are applied, then GST can not be claimed and purchases can not be deducted for income tax.

There are a range of different rules for government agencies and not for profits. Please contact us for advice regarding these types of entities.

Information is general in nature and not intended to be advice specific to your circumstances. Please contact us for advice suited to you.