As the festive season fast approaches, you’ll turn your focus on annual seasonal celebrations. While expressing gratitude towards loyal employees with gifts, refreshments, and entertainment, going overboard could impose a hefty FBT bill.
Every team should take the opportunity to celebrate their achievements. That’s why we’ve constructed this clear guide on how you can curb spending to prevent FBT charges without compromising on fun. Let’s dive in!
What’s the FBT Threshold?
As of 2023, the fringe benefits tax (FBT) threshold is $300 per head. The value per person applies to employees, their partners, and other associates, like stakeholders. Seems pretty generous, right?
Here’s the catch–while a single gift of $300 would leave you exempt from FBT, combined prices of food and travel tip the cost per head over the threshold, leaving you liable for this tax.
Fortunately, the threshold doesn’t carry over to the following year, meaning accumulated costs in previous years won’t impact this year’s spending.
How to Reduce or Become Exempt From FBT
Refreshments offered to employees at your official workplace are FBT-exempt, so holding an on-premise party could be a great option for larger teams. The threshold applies when offering off-site entertainment and refreshments.
The Australian Taxation Office deems entertainment and recreational activities as social functions, sports events, and theatre shows.
You could ask employees for contributions towards the event to reduce your FBT. This value doesn’t go towards the $300 threshold, as the business itself didn’t fund it. Alternatively, you could provide cash bonuses instead of physical benefits to omit FBT, depending on what’s right for your business.
Keep an eye on the travel you’ve offered to invitees. While taxi travel to a second venue could be FBT-free, paying for secondary travel enabling guests to get home could have implications.
How Do You Monitor Your Spend?
Calculating the total cost of FBT-liable activities before booking event venues and tickets helps you make informed celebratory decisions. Here are several steps for monitoring your spending:
- Lay out provisions: Evaluate your Christmas party plans to determine whether they impose on FBT criteria, such as off-site entertainment and the cost of your desired activity (like attending a restaurant meal).
- Identify tax-exempt activities: If you have space, consider hosting an initial get-together at your workplace, as on-site refreshments are exempt. Although not exempt from this, associates and partners can join, provided you’re willing to pay a minor benefit.
- Total expenses: Use spreadsheet software to align activities with the cost. The SUM function will give you an accurate total. You can then divide the total per head.
Take Charge of Your FBT Liability this Season
Incurring unexpected FBT can become highly destructive to businesses that haven’t accounted for this cost.