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Christmas – the FBT, Tax and GST Consequences to be aware of

By Chris Smith

With the festive season almost in full swing, it’s important to be aware of the tax implications of providing your employees with gifts, and throwing the end of year team function.

Depending on the type of gift or entertainment provided, the business will have different Fringe Benefits Tax (FBT), Tax and GST consequences.

A table has been provided below to help navigate these complex rules.

Entertainment vs Gifts – potentially different tax treatment:

The Christmas party thrown for employees and their associates is considered entertainment.

Gifts, however, can fall into one of two categories,

  • entertainment (eg: theatre tickets, sporting events, meal and accommodation vouchers), and
  • non-entertainment (eg: hampers, flowers, wines, perfumes, non-entertainment gift vouchers).

Entertainment provided to employees is not tax deductible unless FBT applies (refer to table below).

Non-entertainment gifts on the other hand, are tax deductible – whether or not FBT applies.

$300 – an important number:

An FBT exemption applies for benefits provided to employees LESS THAN $300 (including GST), as long as that benefit is “minor and infrequent”.

If the benefit provided is $300 OR MORE, then FBT will apply.

Cheat Sheet – what is subject to FBT, what is tax deductible, and what can GST be claimed on:

The below table provides a summary of when FBT applies, what you can claim a tax deduction for, and what you can claim GST credits back on.

It assumes:

  • Benefits provided less than $300 are minor and infrequent
  • Business is not relying on the 50/50 method for FBT purposes

FBT-Christmas-Summary-Table1024_1

CLICK TO DOWNLOAD AS A PDF

The above is only a high level summary of some complex tax consequences of throwing a Christmas party, and giving gifts to your staff to thank them for the hard work over the last 12 months.

If you have any questions, or would like more specific information on the above, please contact Chris Smith at chris.smith@brentnallswa.com.au or on (08) 6212 7200.