What is Fringe Benefits Tax (FBT)?
A fringe benefit is a type of payment to employees that is different to normal salary or wages. FBT is paid by employers on certain benefits they give to their employees or their employees’ family or other associates. FBT applies even if the benefit is provided by a third party under an arrangement with the employer.
As per the ATO, examples of fringe benefits include:
- Allowing an employee to use a work car for personal use
- Giving an employee a discounted loan
- Paying for 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
FBT is separate to income tax and is calculated on the taxable value of the fringe benefit. Employers can generally claim an income tax reduction for the cost of providing fringe benefits and for the fringe benefits tax they pay. Employers can also generally claim GST credits for items provided as fringe benefits.
How does it affect your end of year Christmas party?
With the end of the year fast approaching, many businesses are already organising Christmas gifts and planning their end of year Christmas party for staff.
With the COVID-19 pandemic, many businesses are changing up the way they do Christmas gifts and parties, with many choosing online gift cards and virtual events.
There’s no separate FBT category for Christmas parties and if you’re not careful you may come across some difficulties from the ATO. Here are some guidelines from the ATO to keep in mind when planning your Christmas party.
Exempt property benefits
The costs (such as food and drink) associated with Christmas parties are exempt from FBT if they are provided on a working day, on your business premises and consumed by current employees. The property benefit is only available for employees, not associates.
Exempt benefits – minor benefits
The provision of a Christmas party to an employee may be a minor benefit and exempt if the cost of the party is less than $300 per employee and certain conditions are met. The benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300.
Gifts provided to employees at a Christmas party
The provision of a Christmas gift to an employee may be a minor benefit that is an exempt benefit when the value of the gift is less than $300.
When are FBT returns due?
Employers must lodge an FBT return if they have a liability (also known as a fringe benefit taxable amount) during an FBT year (1 April to 31 March). If you are preparing your FBT return yourself, you can lodge up to 25 June without incurring a failure to lodge penalty. The payment due date is 21 May.
With a tax agent, the due date to lodge and pay is 21 May. If you’re registered for FBT but don’t need to lodge a return for the year, you can complete a Fringe benefits tax – notice of non-lodgment form.
Are you confused yet?
Fringe benefits can be confusing and if you’re not careful you may miss the tax implications it can cause your business. If you’re confused, don’t worry because our accountants are here to help you. Get in touch with us to not only stay on the ATO’s good side but to ensure that your end of year celebrations are a success.