As the holiday season approaches, we need to be mindful that employers carefully consider the entertainment-related benefits they provide to their staff. Before arranging celebrations or events, employers should assess whether these benefits are subject to fringe benefits tax (FBT) and what can be done to minimise the FBT and therefore total costs involved.
Factors that will impact whether FBT will be incurred are:
The amount spent per employee;
The timing and location of the celebration;
The guest list (employees, partners, clients, or suppliers); and
The nature and value of any gifts provided.
It is important to maintain thorough records of entertainment-related benefits and their taxable values and details of who attended. Unfortunately, failing to understand FBT implications beforehand may lead to unexpected tax liabilities.
For further information from the ATO, search for 'Fringe benefits tax and entertainment' for more guidance.