Fringe benefits tax and entertainment for small business

It is important for all small business employers to understand their fringe benefits tax (FBT) obligations, this is especially important around the Holidays with end of year holiday events and employee gifts. If you provide your employee or their families with food, drinks or gifts you may be subject to FBT as these can be classified as providing entertainment.

Providing entertainment

Providing entertainment commonly means:

·         providing entertainment by way of food, drink or recreation

·         providing accommodation or travel in connection with such entertainment

·         paying or reimbursing expenses incurred in obtaining something covered by the above points

Some of the most common entertainment examples are:

·         Staff social events such as Christmas parties and anniversary dinners

·         Business lunches with clients

·         Gym memberships

·         Sporting club memberships

Christmas parties are classified as entertainment and may attract FBT. Your Christmas party expenses (food and drink) may be exempt from FBT if they are provided during regular work hours, are consumed on the business premises and are only consumed by current employees.  Christmas parties that are held off the premises may be exempt from FBT if the cost of the party is less than $300 per current employee and other conditions are met. For more information on Christmas parties and your FBT obligations you may contact us or visit the ATO.

https://www.ato.gov.au/Business/Fringe-benefits-tax/Types-of-fringe-benefits/Entertainment-related-fringe-benefits/common-entertainment-scenarios-for-business/

Employee Gifts

Non-entertainment gifts such as flowers, hampers, skincare, wine, groceries and non-entertainment vouchers are generally not subject to FBT and the GST credit is claimable provided they cost less than $300 (including GST). For non-entertainment gifts that cost over $300, you are still able to claim the GST credit however the gift may also be subject to FBT at a rate up 49%.

Gifts classified as entertainment including holidays, tickets to events, club memberships and flights may be tax deductible however they are liable for FBT at a rate of 49%.

Tips for gifts to your employees, ensure the gift is

·         $299.99 or less

·         A non-entertainment

·         A once-off gift