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Employment Relations, Taxation

Think your boss is being a Scrooge? Blame the tax office

21 November 2023 2 mins read
CPA Australia's Head of Policy & Advocacy, Elinor Kasapidis.
  • How Fringe Benefits Tax (FBT) impacts your work Christmas party
  • Any gift costing more than $300 attracts a tax rate of 47%
  • Why your company won’t be paying for your taxi ride home

If you’re left feeling a tad underwhelmed by your manager’s Christmas gift or the work Christmas party, they may not be the total Scrooge you think they are, they might just be trying to avoid the tax Grinch.

That’s because Christmas parties and gifts can attract Fringe Benefits Tax, which is likely to restrict your company’s ability to give you a present or party worth shouting about.

So, it’s probably best not to expect anything worth more than about $300.

“Providing benefits to employees creates tax consequences,” says Elinor Kasapidis, Head of Policy and Advocacy at CPA Australia. “Employers are likely to have to pay FBT which can prove incredibly costly to businesses, especially when buying gifts or organising a party for many people.

“It’s all about the $300 rule – the benefit employers give to employees must fall under this amount to avoid FBT. For amounts greater than $300, FBT of 47% will apply.

“A fragrant candle or a company-branded mug will be OK, but don’t expect anything too pricey.”

Ms Kasapidis says it’s worthwhile organisations have a refresher on the implications associated with their end of year work celebrations and gifts before setting employee expectations. There are some ways to limit the impact of FBT on your celebrations.

“The day of the week your Christmas party is held on can have FBT implications,” she explains. “If a Christmas party is held in the office on a typical workday, the food and drinks costs are usually exempt from FBT. But if you want a weekend Christmas gathering, you’ll potentially incur FBT.

“Provided your end of year party costs less than $300 per employee and plus-one, it will typically be FBT exempt. The cost of entertaining clients is not subject to FBT.”

Ms Kasapidis says that businesses should be aware that gifts and Christmas parties are measured for FBT separately.

“If you give your employee a gift worth up to $300 and throw a party for employees where the cost per head is under $300, both will be exempt benefits even though the combined total exceeds $300.”

Ms Kasapidis adds that businesses need to be aware of travel circumstances when putting on festive season events for staff.

“Taxi costs to help your employees get home may incur FBT in some situations. FBT doesn't apply if the party is held in the workplace and the taxi fare is to go home,” she said. “However, if you have booked a separate venue away from your work premises, then a trip from work to the party may be exempt, but the second trip may not be.

“Income tax and FBT can be complicated. If you’re unsure what to do, seek advice from a registered tax agent, like a CPA.”


About us:

About CPA Australia

CPA Australia is Australia’s leading professional accounting body and one of the largest in the world. We have more than 172,000 members in over 100 countries and regions. Our core services include education, training, technical support and advocacy. CPA Australia provides thought leadership on local, national and international issues affecting the accounting profession and public interest. We engage with governments, regulators and industries to advocate policies that stimulate sustainable economic growth and have positive business and public outcomes. Find out more at cpaaustralia.com.au


Contact details:

Simon Downes

External Affairs Lead

simon.downes@cpaaustralia.com.au

0401 461 503

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