The Christmas Crunch: Sun, Surf, and… Fringe Benefits Tax?

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ByWild Orange Strategies
Christmas Crunch- sun, surf and fringe benefits tax

November is here! Workdays are packed, deadlines loom, and yet the sun is out, taunting us all with dreams of beach days, BBQs, and cold drinks in hand. But alas, work calls and so does Fringe Benefits Tax (FBT).

It’s the start of the social season. A whirlwind of end-of-year parties and client events that inevitably end with one thing: a steep credit card bill that come February, you will inevitably be dealing with.

If this year-end scramble feels all too familiar, you’re certainly not alone. Many businesses go through this annual balancing act between year-end responsibilities and the pull of festive fun. And if you’re planning a Christmas party, there’s one more thing to keep in mind: Fringe Benefits Tax.

Fringe Benefits Tax: Because Nothing’s Truly Free

If you are planning an end-of-year Christmas party, just remember: the Tax Office will get an invite too.

Fringe Benefits Tax applies to benefits provided to employees (and their plus-ones) that aren’t directly related to work. Think of it as a tax on your team’s good time.

The Basics of Fringe Benefits Tax:

  • The $300 (inc GST) Rule: For employees, any benefit under $300 (including GST) per head is FBT-free as it isn’t eligible for a tax deduction. This includes the works—food, drinks, and maybe even a few decorations. But before you get too excited, remember: plus-ones don’t get the same exemption.
  • 47% FBT on Benefits: If you go over the $300 mark or offer benefits to plus-ones, you’ll need to calculate FBT at 47% of the benefit’s value.
  • This isn’t a choose-your-own adventure: FBT applies to specific expenses that directly benefit employees and can be claimed as tax deductions. Each type of expense has its own rules so it can get a bit technical. Unfortunately, when it comes to tax, you don’t get to pick and choose what’s out-of-pocket and what’s subject to FBT—it’s all set by the tax office.

Why Fringe Benefits Tax (FBT)?:

The taxman’s reasoning is simple: FBT is designed to prevent businesses from writing off employee perks and entertainment as “business expenses.” A champagne toast isn’t exactly critical to business.

Fringe Benefits Tax Decision Guide: What to Ask Your Accountant

Fringe Benefits Tax is rather technical and there are a few factors involved. If you are wondering if Fringe Benefits Tax applies to your end-of-year plans, here are some questions for you to think about.

You can provide these answers to your accountant so they can advise you on your options:

  • Are plus-ones invited?
  • Is the party on or off the company premises?
  • Will food and drinks be provided?
  • Is company-funded transport included?

When it comes to Fringe Benefits Tax, choosing the best path for your business depends on your setup, budget, and the type of holiday cheer you’re aiming to spread. So, to avoid surprises in April, be sure to chat with your accountant. They’ll help you find the best option—ideally, one that leaves both you and your employees smiling.

Unsure if Fringe Benefits Tax applies to you this Christmas Season? Book a Call.

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