The end of the year might be the time that you look for ways in which to say thank you to your hardworking employees, especially after the ongoing business challenges that may have emerged over the past 12 months.
While a work Christmas party may have been a previous method that you have employed to demonstrate this, the expense of it could be a deciding factor. Christmas parties are regarded as “entertainment” expenditures, which means they are not tax-deductible, and the
employer may have to pay FBT if the party costs $300 or more per person.
An end-of-year party may not be feasible for your business this year, with rising costs amid the ongoing inflation rates.
Instead, it may be a better idea to thank your staff through the act of giving certain items known as “non- entertainment” gifts. These non-entertainment gifts cost less than $299.99, are fully tax-deductible and carry no FBT.
Non-entertainment gifts are usually exempt from FBT when the total cost of the gift is less than $299.99 (inclusive of GST). An employer can also claim tax deductions and GST credits for every non-entertainment gift to staff members. These gifts could include beauty or skincare products, flowers, wine, gift vouchers or hampers.
If you provide a similar gift to the spouse/partner of an employee, the FBT exemption will also be valid. This can be a nice way to say thank you to the hard-working members of your staff while promoting a positive work culture.
Providing your employees with gifts considered to be “non-entertainment gifts” but costing $300 or more (including GST) is less tax effective. Even though the gift giver can still claim a tax deduction and GST credit, FBT must be paid at 49%.
You can still give staff members entertainment gifts as a way of saying thank you, though this is a less beneficial and tax-favourable option from an employer’s point of view. Examples of entertainment gifts include tickets to a play, sports event, musical, theatre or even providing a holiday.
Some fringe benefits (such as these gifts) may need to be included in payment summaries. When the value of certain fringe benefits amounts to more than $2,000 in an FBT year, it is your responsibility to record that amount in your payment summary.
Want to know more about possible FBT exemptions that might apply to any gifts you give to your employees this holiday season? Speak with us about how you can make this work for your situation.