With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.
An employer holds a Christmas party for its employees and their spouses. The cost of food and drink per person is $250 and no other benefits are provided.
If the actual method is used:
For all employees and their spouses – no FBT is payable (i.e., by applying the minor benefit exemption), however, the party expenditure is not tax deductible.
Gifts that are not considered to be entertainment
These generally include, for example, a Christmas hamper, a bottle of whisky or wine, gift vouchers, a bottle of perfume, flowers, a pen set, etc.
Briefly, the general FBT and income tax consequences for these gifts are as follows:
• Gifts to employees and their family members – are liable to FBT (except where the ‘less than $300’ minor benefit exemption applies) and tax deductible; and
• Gifts to clients, suppliers, etc. – no FBT, and tax deductible.
Minor benefit exemption
The minor benefit exemption provides an exemption from FBT for most benefits of ‘less than $300’ that are provided to employees (and their family/associates) on an infrequent and irregular basis.
The ATO accepts that different benefits provided at, or about, the same time (such as a Christmas party and gift) are not added together when applying this threshold.