Filling stockings with Christmas cheer without the tax

Wednesday 2 December, 2015 | By: Darrell Giles | Tags: fringe benefits tax, BDO;

Believe it or not, bosses can channel Saint Nicholas and not Ebenezer Scrooge, when it comes to party time.

They can put their hands in their pockets and still come out as winners and grinners.

With Christmas just around the corner, the drinks have started flowing and merriment has begun.

Employers are looking to thank and acknowledge their staff for another year of hard work.

Ann Stratikopoulos, partner of audit, tax and advisory firm BDO, says there is a way for employers to be overly generous during the festive season and not get into financial strife.

But, she warned: “No one wants a nasty post-Christmas delivery from the Tax Office.” 

In order avoid fringe benefits tax surprises she provides five tips for filling your employees’ Christmas stockings without leaving you denouncing Christmas as a fraud like Ebenezer Scrooge.

“However, most of these tips will only apply where employers do not use the 50-50 split method for valuing meal entertainment and are not a not-for-profit organisation,” she said.

Tip 1: Host your Christmas party on business premises

The most tax-effective way of hosting a Christmas party is to hold the event on business premises. Goods supplied to, and consumed by, an employee on a working day on the employer’s premises are exempt from fringe benefits tax. The cost of friends or family of the employees attending the party will not be exempt from fringe benefits tax unless it is a minor benefit.

Tip 2: Keep the value of the party under $300 per head

Where the cost of the Christmas party is less than $300 per head and other requirements of the minor benefit rule are met, the minor benefit rule will treat the benefit as being exempt from fringe benefits tax.

Tip 3: Consider the cost of travel to parties

The cost of providing travel to and from a Christmas party will be included in the cost of hosting the party. Don’t go to the trouble of planning your party at the upper limit only to realise the cost is $300 or more due to taxi travel to and from the venue.  If the cost of the party is $300 or more for a particular employee then the whole of that particular benefit will be taxable for fringe benefits purposes, not just the excess.

Tip 4: Keep the value of gifts under $300 per employee

Where the value of a Christmas gift provided to an employee is less than $300 and other minor benefit conditions are met, the gifts will be exempt from fringe benefits tax.

Tip 5: Separate the cost of associated benefits

While the Christmas party and Christmas gifts may be associated benefits, don’t forget you can separate the cost of each benefit to determine whether each is valued at less than $300 for the purpose of the minor benefit rule.

“Following these tips will ensure you can maximise how generous you can be with employees.” Ms Stratikopoulos said.

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