Christmas celebrations and FBT implications

With summer and Christmas celebrations just around the corner, you may plan a party or a day on the green with your employees. Before you fire up the BBQ, consider your celebration’s fringe benefits tax (FBT) implications.

Fringe Benefits Tax (FBT) applies when an employer provides benefits to an employee other than their regular salary or wage. The circumstances that determine an FBT event include:

• the amount you spend on each employee
• when and where your party is held
• who attends – is it just employees, partners, clients, or suppliers also invited?
• the value and type of gifts you provide.

Don’t forget to keep all records relating to the entertainment-related fringe benefits you provide, including how you worked out the taxable value of benefits.

Christmas party held on the business premises

The below tables contain general information on the different types of Christmas parties that may be held and the FBT implications for such parties.

Your business decides to have a party on its premises on a working day before Christmas, and you provide food, beer and wine. The implications would be as follows:

 

 

If…	When…
Current employees only attend	For employees – there is no FBT implication as it is an exempt property benefit. There is no tax deduction and no GST claimable.
Current employees and their families attend at the cost of less than $300 per head (GST inclusive)	For employees and family – there will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable.
Current employees, their families and clients attend at the cost of $300 or more per head (GST inclusive)	For employees – there are no FBT implications as it is an exempt property benefit. There is no tax deduction and no GST claimable. For a family – a taxable fringe benefit arises where the value is $300 per person or more. For clients – considered entertainment, however, no FBT implications but no income tax deduction either and no GST claimable.

 

Christmas party held off the business premises

You decide to hold your Christmas function at a restaurant on a working day before Christmas and provide meals, drinks and entertainment. The implications would be as follows:

If…	Then…
Current employees only attend at the cost of less than $300 per head (GST inclusive)	There will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable.
Current employees and their families and clients attend at the cost of less than $300 per head (GST inclusive)	For employees – there will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable. For a family – there will be no FBT implications as the benefit is considered minor and infrequent. There is no tax deduction and no GST claimable. For clients – considered entertainment, no FBT implications, no income tax deduction, and no GST claimable.
Current employees, their families and clients attend at the cost of $300 or more per head (GST inclusive)	For employees – a taxable fringe benefit arises where the value is $300 per person or more. A tax deduction and GST credit can be claimed. For a family – a taxable fringe benefit arises where the value is $300 per person or more. A tax deduction and GST credit can be claimed. For clients – considered entertainment, however, no FBT implications but no income tax deduction either and no GST claimable

 

Christmas gifts

The following table briefly summarises the general FBT (and other tax) consequences for an employer providing Christmas gifts based on the ATO’s guidelines.

Type of gift	Gifts to employees and their family	Gifts to non-employees (clients, suppliers, contractors, etc.)
Non-entertainment gifts. For example: ■ Christmas hamper ■ Bottle of wine or whisky ■ Gift voucher ■ Bottle of perfume ■ Flowers ■ Pen set	Subject to FBT (unless exempt – e.g., the minor benefits exemption applies) and income tax deductible*. To be an exempt minor benefit, the total cost of a gift must be less than $300 (GST inclusive) and provided infrequently. If the gift is FBT exempt, no income tax deduction and no GST credit can be claimed.	No FBT applies.   An income tax deduction is allowed.*   GST input tax credits can generally be claimed.
Entertainment gifts. For example: ■ Theatre/movie tickets ■ Tickets to a sporting event ■ Holiday Accommodation	Subject to FBT (unless exempt – e.g., the minor benefits exemption applies) and income tax deductible*. The total cost of a gift must be less than $300 (GST inclusive) and provided infrequently to be an exempt benefit. If the gift is FBT exempt, no income tax deduction and no GST credit can be claimed.	Not subject to FBT.   No income tax deduction can be claimed.   GST input tax credits cannot be claimed.

* No deduction is allowed for any GST input tax credit entitlement

Key takeaways

In summary, the key here is to know your limits keeping in mind that the $300 “minor and infrequent” benefit threshold for FBT is the key to your Christmas party and gifts remaining tax-free. Note that the $300 threshold applies to each benefit provided, not to the total value of the associated benefit. Where does taxi travel stand in all of this? Any benefit arising from taxi travel by an employee is exempt if the travel is a single trip beginning or ending at the employee’s place of work.

How to protect yourself online

Throughout October, the Australian Cyber Security Centre (ACSC) is sharing guides and resources that will help you protect all your information from cyber criminals.

Update your devices and applications

Cybercriminals hack devices by using known weaknesses in systems or apps. Check your devices for updates, and turn on automatic updates so that future updates are made immediately when charging and in Wi-Fi.

Turn on multi-factor authentication

Multi-factor authentication (MFA) is a security measure that requires at least 2 proofs of identity to grant access. MFA options can include a physical token, random pin or fingerprint. Using MFA significantly boosts your protection against criminals. While they might steal one proof of identity, like your password, they will be locked out of your account without the other.

Set up backups

Backing up your data means saving copies of your files to an external storage device or an online server like the cloud. It means you can restore your important information if something goes wrong. Setting up automatic backups in your system or application settings will give you peace of mind.

Why you must lodge on time

If your entity is more than 12 weeks late in lodging BAS, you automatically become subject to a Directors Penalty Notice (DPN). If the business cannot pay its debts, you may become personally liable for your entity’s unpaid PAYG withholding, GST, and Superannuation.

Also, the Government will increase the amount of the Commonwealth penalty unit from $222 to $275 from 1 January 2023. The increase will apply to offences committed after the relevant legislative amendment comes into force. The amount will continue to be indexed every 3 years in line with the CPI as per the pre-existing schedule, with the next indexation occurring on 1 July 2023.

Penalty units describe the amount payable for fines under Commonwealth laws, including in relation to communication, financial, tax and fraud offences. Fines are calculated by multiplying the value of one penalty unit by the number of penalty units prescribed for the offence. This measure ensures that financial penalties for Commonwealth offences continue to remain effective in deterring unlawful behaviour and contribute to budget repair.

Estimates for the value of goods taken from trading stock for private use

Taxation Determination TD 2022/15, published on 19.10.2022, provides an update of amounts the Commissioner will accept as estimates of the value of goods taken from trading stock for private use by taxpayers in named industries. The updated amounts are contained in the schedule for the value of goods taken from trading stock (the schedule) in paragraph 2 of this Determination. The schedule for the value of goods taken from trading stock for private use in the 2022-23 income year is as follows:

 

Type of business	Amount (excluding GST) for adult/child over 16 years	Amount (excluding GST) for children 4 to 16 years old
Bakery	$1,360	$680
Butcher	$990	$495
Restaurant/café (licensed)	$4,830	$1,950
Restaurant/café (unlicensed)	$3,900	$1,950
Caterer	$4,120	$2,060
Delicatessen	$3,900	$1,950
Fruiterer/greengrocer	$1,010	$505
Takeaway food shop	$4,030	$2,015
Mixed business (includes milk bar, general store and convenience store)	$4,870	$2,435

 

Motor vehicle expenses for a home-based business

Generally, a taxpayer cannot claim a tax deduction for travel for continuing from commuting from home to their place of work. However, if you’re operating a home-based business, you can claim the cost of trips between your home and other places if the travel is for business purposes. For example, you could claim the cost of travel to:

• a client’s premises, if you’re working there or delivering some documents
• purchase equipment or supplies
• the bank to do your banking
• the post office to mail out invoices or get mail from a PO Box
• see your business tax agent or BAS agent.

Depending on your business structure, you can use different methods to calculate motor vehicle expenses.

Superannuation over summer

The holiday season is fast approaching, and your holiday casuals may now be eligible for super.

From 1 July 2022, you need to pay super for employees at a rate of 10.5%, regardless of how much you pay them. This is because the $450-per-month threshold for super guarantee (SG) eligibility has been removed.

Take Jane, for instance. She is a 22-year-old employee working a short-term job at a restaurant over the holiday season, and she works 23 hours a month, earning $430 before tax.

In the past, holiday employees such as Jane would not be paid super as they earned below the $450 threshold. Now, Jane will be eligible for super pay on her ordinary time earnings at 10.5%.

This change doesn’t affect other eligibility requirements for SG. Workers who are under 18 still need to work more than 30 hours a week to be eligible.

For example, Anish is a 17-year-old employee working at a hotel over the holiday season. Anish works 32 hours weekly at the hotel and earns $800 before tax. He also works 5 hours at his local café, earning $150. As Anish worked more than 30 hours in one week at the hotel, his employer must pay him super on the $800 earned. As Anish works less than 30 hours a week at the café, he is not entitled to super from this employer. Likewise, Anish isn’t entitled to super for any weeks he works less than 30 hours at the hotel.

Check your payroll and accounting systems are up to date, so you are correctly calculating your employees’ SG payments.