Entertaining your employees
Nov 01, 2022
As the end of the year approaches, you may be thinking about your ‘barista of the year’ awards or planning a party with your employees!
While you’re serving up a side of festivities with that parma lunch special, make sure you consider the fringe benefits tax (FBT) implications of your celebration. Would FBT apply to that party, or that engraved glass for the winner of the blind wine tasting competition?
If you hold a party:
- on a working day, on your business premises, and only for your current employees, you don’t pay FBT for the food and drink
- off your business premises, or the party includes associates of employees (such as their partners), you don't pay FBT if the party is a minor benefit – that is, the cost for each person is less than $300 and it would be considered unreasonable to treat it as a fringe benefit.
If you give your employees a gift:
- your FBT obligation depends on the value and type of gifts you provide
- you don't pay FBT if the gift is a minor benefit.
Example: Party on business premises
Perfect Piccolo closes their café a couple of hours early to hold an afternoon tea on its business premises, mini sandwiches, champagne and all.
- Employees and their partners attend.
- Food and drink, and taxi travel home is provided.
- The cost per head is $125.
- Each employee gets a $50 bottle of wine.
- One employee gets a $470 coffee machine for making the best latte art on the day.
Even if the menu served was less fun than a metre long cheeseboard, the purpose of the party is for the people attending to enjoy themselves. So the party would be considered entertainment and Perfect Piccolo would need to consider if FBT applies.
FBT doesn't apply for the:
- food and drink for employees, because it is provided and consumed on a working day on the business premises
- taxi travel for the employees, because there is a specific FBT exemption for taxi travel directly to or from the workplace
- food, drink and taxi travel provided to the employees' partners, because it is a minor benefit – that is, it has a value of less than $300 and it would be unreasonable to treat it as a fringe benefit
- the $50 bottle of wine, because it is also a minor benefit.
FBT does apply for the:
- the $470 coffee machine, because the value is $300 or more – so the minor benefit exemption cannot apply.
Remember, keep all records relating to the benefits you provide, including how you calculated their value.
For more information, including claiming income tax deductions and GST credits, visit Entertainment-related benefits.
