If you’re planning to reward your team with a business lunch, seminar or gift, it’s important to consider whether it will have Fringe Benefits Tax (FBT) implications.
What is fringe benefits tax (FBT)?
A fringe benefit is a 'payment' to an employee, but in a different form to salary or wages. How an employer calculates and reports the taxable value of fringe benefits depends on the type of benefit provided – that is, how it's categorised for FBT purposes.
FBT is incurred on benefits given to employees over $300 as it is considered income other than salary or wages, paid by the employer. If the cost of food and drink consumed by employees and their spouses is over $300 per head at your in-house party, you will incur and need to pay FBT on the expenses of your employees spouse or family members only.
You won’t need to pay FBT if the costs remain under $300 per head as it is considered a minor benefit, but if the costs rise over $300, you’ll need to pay FBT for your employees and their spouses and family. The good news is, if you have clients attending, you won’t incur the FBT on their heads.
It pays to know your limits
There are many options to consider when it comes to reducing your FBT liability.
You may not have an FBT liability if you give an employee a benefit that they would otherwise have been able to claim as an income tax deduction.
You can reduce your FBT liability by having your employee contribute towards the cost of a fringe benefit
If you provide your employee with a cash bonus instead of a benefit you won't have to pay FBT, and the employee will pay income tax on the amount.
The ATO has recently published detailed information on how FBT may apply to those businesses providing employees with benefits because of COVID-19.
Note: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice.
This area is extremely complicated and if you’re unsure or wish to confirm any issues, please reach out.
As always, our team is here to help. If you would like assistance or have a question, contact us.