Fringe Benefits Tax (FBT): Staff Parties & Client Gifts

As we approach the end of the FBT year on the 31^st of March, many clients come to the realisation that the Christmas Party and bottle of Grange to their favourite suppliers are all regarded as a “benefit” for FBT purposes.

In the eyes of the ATO a Fringe Benefit includes:

• allowing an employee to use a work car for private purposes
• giving an employee a discounted loan
• paying an employee’s gym membership
• providing entertainment by way of free tickets to concerts
• reimbursing an expense incurred by an employee, such as school fees
• giving benefits under a salary sacrifice arrangement with an employee.

https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/

FBT is calculated on the grossed up taxable value of the fringe benefit. Careful planning around fringe benefits can enable you to claim certain deductions for providing that benefit which will ultimately reduce your overall tax liability.

GST credits can also be generally claimed for items provided as fringe benefits.

Staff Parties

Staff parties occur throughout the year (and so they should!) to strengthen relationships and help build good team culture. It is important to understand how this should be treated for FBT purposes.

There are FBT exemptions for those who provide benefits during a working day, on your own premises and consumed by current employees. Further exemptions also apply for minor benefits provided where the cost is less than $300 per head.

In a post COVID world, many businesses are changing up the way they provide gifts and parties, with many choosing online gift cards and virtual events.

The ATO has some useful resources on what to plan for with Staff Parties. https://www.ato.gov.au/general/fringe-benefits-tax-(fbt)/in-detail/fbt-and-christmas-parties/

Client Gifts

The provision of a gift to an employee, client or supplier may be a subject to FBT.

Failing to plan for the addition cost of FBT, especially taking into account that tax is levied on a grossed up taxable value can significantly impact the decision for the bottle of Grange or the Pepperjack.

Again the $300 minor benefit exemption does apply however you need to be careful on the criteria on what that constitutes.

FBT Compliance

The FBT year runs from 1^st of April to 31^st March each year and lodgement date is the 25^th of June. Payment dates for FBT are due EARLIER than lodgement on the 21^st of May.

Go Figure!

Many clients are not aware of their FBT obligations and never register for FBT. Client “add backs” are an accepted accounting method commonly used to recognise private usage on assets to avoid any FBT exposure.

However its important to note than when registered and an FBT return is lodged, you start the audit period which effectively means that the ATO has 2 years to conduct an audit.

Failing to register and lodge gives the ATO an unlimited timeframe for audit review.

To discuss any of these items in further detail, please reach out to your Tax & Advisory client manager or contact us on info@thegildgroup.com.