5 tips to keep your staff Xmas party FBT-friendly

Before we all hang up our boots for some well-earned Christmas cheer, it is worth brushing up on Fringe Benefits Tax (FBT) to make sure your celebrations aren’t dampened by the taxman in the new year.

Here are our top 5 tips for ensuring your staff Christmas party is FBT-friendly – leaving you to focus on the good stuff.

1.      Record-Keeping

The golden rule is record keeping. Keeping detailed records for entertainment, meals, alcohol & gifts is key – the what, who, when & how much. When it comes time for us to assess your FBT obligations in May next year, we will be asking you for this information.

Keeping good records now will prevent a lot of head scratching and memory dredging down the track.

2.      The $300 Rule

Generally, if the cost of the party or gift is less than $300 (including GST) per employee/associate, and the employee/associate is not regularly provided with similar benefits, then it may be considered a minor benefit – which is exempt from FBT.

Please note there are exceptions to this rule, so contact the office if you would like further clarification.

3.      Entertainment vs Non-Entertainment

When thinking about gifts for staff, an important consideration is whether the item falls into either the ‘entertainment’ or ‘non-entertainment’ FBT categories.

Non-entertainment gifts typically include hampers, bottles of wine, gift vouchers etc.

Entertainment gifts refer to items such as movie passes, music/sporting tickets etc.

The best FBT minimisation strategy would be to select gifts within the non-entertainment category – remembering to stay under $300 per employee.

4.      Venue Choice

From an FBT perspective, the most tax-effective option may be hosting staff on your business premises during a work day.  

When the entertainment is valued using the ‘actual method’, the associated expenses such as food & alcohol are generally exempt from FBT with no dollar limit. Please note however that this method means you’re unable to claim the expense as an income tax deduction or claim the GST credit.

Further note that this only applies to employees, with a taxable fringe benefit potentially arising if associates (ie. partners) are invited, and the cost is more than $300 per head.

5.      Invite List

It is also worth noting that the $300 minor benefit threshold applies per head, and not per employee. Therefore, if you invite your staff and their partners to a Christmas function at $200 per head, the minor benefit exemption could apply to both the employee and their partner.

FBT is not always straightforward, and there are often many considerations that come into play.

There is no single ‘Christmas Party’ FBT category, so we need to consider the multiple FBT categories involved and each of their different concession, exemption, deduction & valuation rules.

As you are making your staff party plans, we recommend contacting your accountant to discuss if there are any potential FBT headaches that need to be mitigated.  

By planning ahead, you can avoid any potential nasty FBT surprises in the New Year – leaving you and your staff free to let the eggnog & good times flow.  

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