Employers should be aware of the tax benefits of Christmas entertainment, and ensure they are getting the most out of their exemptions, tax experts claim.
Employers should be aware of the tax benefits of Christmas entertainment, and ensure they are getting the most out of their exemptions, tax experts claim.
An increase in the minor fringe benefits threshold to $300 last year means employers can now write off more entertainment benefits, Deloitte’s employment taxes partner Frank Klasic claims.
Employers who spend less than $300 per person on a fringe benefit can write off the whole amount, but Klasic says the employer can only claim the exemption when certain conditions are satisfied.
“You just need to be aware of what categories you fall into. The treatment is not a blanket exemption – you need to satisfy certain categories,” he says.
“To determine the FBT implications of a function, employers need to consider the income tax status of the employer, where the function is held, who attends, what was provided, how much it costs and how similar functions are treated.”
Klasic says gifts provided at a work event are “associated benefits,” which are included under the tax exemption. If the cost of a gift and party both come in under $300 per employee together, these benefits can be treated by the tax office as minor.
Another helpful benefit is the provision of in-house goods, Klasic says. Up to $1000 can be provided per employee for goods that are ordinarily sold by the employer to the public.
“For example, an employer of a retail store selling sporting goods could supply them as a Christmas present and there’d be no fringe benefits tax.”
But employers need to be careful about what benefits receive exemptions. Klasic says recreational entertainment is reportable on an employee payment summary.
“If there’s entertainment at a function that constitutes a band or concert, or a free ticket to an event, that is reportable on their group certificate. Whereas meal entertainment, the food/drink component of a party, is not.
“The issue is just trying to work out which tax exemptions apply to you and which ones do not.”
Related story:
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
