The ATO Grinch & Fringe Benefits
Comments Off on The ATO Grinch & Fringe BenefitsWe’re all getting excited about our Office Christmas party – but here’s a quick reminder about the tax implications from the ATO Grinch!
If your business holds a Christmas party:
- on a working day, on your business premises, and only for your current employees, you don’t pay fringe benefits tax (FBT) for the food and drink
- off your business premises, or the party includes associates of employees (such as their partners), you don’t pay FBT if the party is a minor benefit – that is, the cost for each person is less than $300 and it would be considered unreasonable to treat it as a fringe benefit
- that includes clients, you don’t pay FBT for the costs relating to the clients.
If you give your employees a Christmas gift, you don’t pay FBT if the value of the gift is less than $300 per person and it would be considered unreasonable to treat it as a fringe benefit.
If the Christmas party is not subject to FBT, you can’t claim income tax deductions (or GST) for the cost of the party.
Quick Guide to FBT (Fringe Benefits Tax)
Fringe Benefits
A fringe benefit is a payment made to an employee but in a different form to salary or wages. Benefits made to volunteers or contractors are NOT fringe benefits. A fringe benefit is provided “in respect of employment”. It can also be a benefit given to an associate of the employee. So, for example if an employer pays the gym fees of an employee’s spouse, this is considered a fringe benefit provided to an associate of the employee.
Examples of fringe benefits include:
- allowing an employee to use a work car for private purposes
- car parking
- paying an employee’s gym membership
- providing entertainment by way of free tickets to concerts
- reimbursing an expense incurred by an employee, such as school fees
- giving an employee a discounted loan
Some work-related items (mainly used for work purposes) are exempt benefits. The exact exemption rules vary for small businesses:
- Portable electronic devices
- Software, protective clothing, tools of trade
‘Minor benefits’ are also exempt
- When it’s both less than $300
- And ‘unreasonable for it to be treated as a fringe benefit’
Fringe Benefits Tax – FBT
FBT is the amount of tax that would have been paid by the employee if they had paid for the benefit out of their own wages, at the top marginal tax rate including the medicare levy (47%) – eg. To buy a gym membership costing $1,100 including GST, the wages required would be $2,075: – $975 tax and $1,100 membership.
Instead of paying the employee extra salary of $2,075, the employer pays the gym membership of $1,100, claims $100 GST credits, and pays the tax required directly to the ATO as FBT. The employer can claim an income tax deduction for both the cost of the gym membership, and the cost of the FBT.
The employee then does not pay income tax on the fringe benefit.
The FBT year is from 1st April to 31st March, and a FBT return must be lodged each year.
For more information visit https://smallbusiness.taxsuperandyou.gov.au/expense-payments-fringe-benefits-tax and https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax
Author:
Wendy Nathan
Kookaburra Veterinary Employment
This information includes the views and opinions of Kookaburra Veterinary Employment and is of a general nature only. Factual information is believed to be correct at the time of writing, however, should not be relied upon and any person should confirm details with the relevant authorities and through their own research prior to acting on any of the suggestions in this article.
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