How to Avoid FBT on Office Christmas Parties and Employee Gifts
As the festive season approaches, many businesses across North Lakes, Redcliffe and greater Brisbane are planning Christmas parties, staff lunches and end-of-year gifts. These are a great way to thank your team, but they can also create Fringe Benefits Tax (FBT) issues if they are not planned carefully.
FBT can apply when an employer provides a non-cash benefit to an employee or their associate, such as a partner. Christmas entertainment and gifts are common examples. The good news is that with the right approach, many festive season benefits can be provided without triggering FBT.
The Minor Benefits Exemption
One of the most useful concessions is the minor benefits exemption. In general terms, a benefit may be exempt from FBT if it costs less than $300 per person, is provided infrequently and irregularly, and it would be unreasonable to treat it as a fringe benefit. This threshold applies to each separate benefit, not as a yearly total. And it is less than $300, so $299 or less.
Christmas Parties: On-Site vs Off-Site
For Christmas parties, the FBT outcome depends on where the event is held, who attends and how much it costs.
On-site parties:
- A Christmas party held on a working day at your business premises, whether that’s an office in Brisbane or a warehouse in North Lakes, is generally FBT-free for current employees. If partners or family members attend, the minor benefits exemption may still apply if the cost per person is less than $300.
Off-site parties:
- If the party is held offsite, such as at a restaurant or function venue in Redcliffe or the Brisbane CBD, it is more important to keep the cost under control. Keeping the cost below $300 per person can help access the minor benefits exemption, provided the event is not a regular or frequent benefit.
Employee Gifts
Employee gifts can also be managed tax-effectively. Non-entertainment gifts such as hampers, flowers, wine, gift vouchers or small items are usually easier to deal with than tickets to events or holidays. If the value of the gift is less than $300 per employee and the other minor benefit conditions are met, it may be exempt from FBT.
Watch the Deductibility Trap
It is important to remember that entertainment expenses that are exempt from FBT are often not deductible for income tax purposes, and GST credits may not be available. Non-entertainment gifts are generally more favourable, as they may still be deductible even where the minor benefits exemption applies.
Keeping the Right Records
Practical steps include setting a per-person budget, separating party costs from gift costs in your records, identifying whether attendees are employees, associates or clients, and keeping invoices and attendance lists. These records make it much easier to work out the correct tax treatment later.
What About Cash Bonuses?
If you choose to reward your employees with a cash bonus, be aware that these are treated differently from Christmas gifts or parties. Because cash payments are salary and wages rather than fringe benefits, they are not subject to FBT. However, they must be processed through payroll, with PAYG withholding applied, and they will generally be included in the employee’s assessable income and reported through Single Touch Payroll, and may need to have super paid too.
What This Means for You
Planning an on-site party in North Lakes, Redcliffe or Brisbane?
Keep it on a working day at your business premises and it will generally be FBT-free for current employees.
Heading offsite for the celebration?
Keep the cost under $300 per person to help access the minor benefits exemption.
Sorting gifts for the team?
Stick to non-entertainment items like hampers, wine or vouchers under $300 per person to keep things FBT-free and often still deductible.
Thinking about a cash bonus instead?
Remember it goes through payroll with PAYG withholding and may need super paid on top.
Talk to Us
Before finalising your festive season plans, speak with us about the best structure for your Christmas party and employee gifts. A little planning now can help you thank your team while avoiding unexpected FBT, income tax or GST consequences.
Nicole Cosgrove
Client Manager
Mark Herron
Principal