Whilst parties might be off the agenda for some business owners this year due to COVID-19, you may want to give your employees a gift to recognise their efforts in what I think we can all agree has been a very challenging year.
But if you’re not careful you may be giving a gift to the taxman as well.
With a bit of planning and an understanding of the rules, you can achieve an optimal outcome and add to your Christmas cheer.
For the technical and the dry content of the mechanics of the FBT rules you can click here but what you really want to know is what can I buy!
Here are some tips and tricks.
Keep the cost per head for your Christmas celebrations to less than $300.
Over $300 and the party will be subject to FBT, essentially doubling the cost of the party, although if FBT is paid, the entire party would be a deductible expense and the GST credits can be claimed. Conversely, if less that $300 pp, no FBT needs to be paid but the expense is not deductible, and the GST credit can’t be claimed.
Separate gift giving and parties.
With a party, all expenses relating to the party need to be combined when calculating the $300 pp amount, e.g. place names, bon bons, food, venue hire, entertainers, gifts on the day etc…. Notwithstanding this, there is a separate FBT exemption relating “property” where a gift of less than $300 given on an ‘infrequent and irregular basis”. So some thought to the timing, quantum of the gift and the party could be beneficial. FBT, GST and deductibility rules as per 1. above, apply.
Give gift vouchers instead of Cash Vouchers/cards.
Gift vouches are considered as ‘Property” for FBT purposes and qualify for an FBT exemption whereas cash does not. This is also true for staff incentives but again, to qualify, giving must be done on an ‘infrequent and irregular basis”. FBT, GST and deductibility rules as per 1. above, apply.
Give a bottle of alcohol instead of a shout of drinks.
Similar rationale as above, packaged goods are defined as property and a shout is defined as meal entertainment. The ‘infrequent and irregular’ and FBT, GST and deductibility rules as per 1. above, apply.
Give Staff (and your business) fun productivity tools.
Items like a new phone, tablet, laptop & smart watch etc. are FBT free and deductible to the extent that they are used for work. GST can also be claimed on these items too.
If you would like to discuss any aspect of the tips above get in touch with us today but most importantly, enjoy your office Christmas party without having to worry about the tax man.