Tax Matters – December 2020 

from TaxArana, 2 Glenlee St, Arana Hills

It is that time of year where attention turns to end of year celebrations and work functions. If you are an employer there is no such thing as a free lunch (or dinner), so just be aware of possible Fringe Benefit tax issues.

FBT (Fringe Benefit Tax) Legislation provides that a Christmas Party holds the characteristic’s of a meal entertainment or recreation benefit, and therefore, may be fully or partly subject to a FBT liability. Further to any FBT liability, will your business be entitled to an Income Tax deduction or be able to claim GST credits on the costs incurred?

Under the actual method, a Christmas party held offsite is only subject to FBT on meal entertainment and recreation benefits on the portion of the expenditure that relates to employees and their associates, clients and suppliers are exempt from FBT. Whilst FBT is not payable on the costs associated with clients and suppliers income tax deductions and GST credits are generally not allowed and therefore can only be claimed on the portion of the expenditure subject to FBT.

Meals (food and drink, including alcohol) provided to current employees on site during normal work hours are exempt from FBT under the property benefit exemption, however their associates will remain subject to FBT.

Another available exemption is the minor and infrequent exemption, where the notional taxable value of a benefit is less than $300, including GST per employee or their associate. The minor benefit exemption can be applied eliminating any FBT payable on the Christmas Party. In calculating the benefit per person, a per head apportionment can be applied to the total cost of the function to determine if the minor benefit can be applied.

For more information contact your local Tax Agent TaxArana 0n 3351 611 or visit their website

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