From 1 April this year, the Fringe Benefits Tax ("FBT") minor exemption threshold increased from $100 to $300. As a result, the value of minor and infrequent rewards and gifts that can be provided to employees has increased threefold without the employer incurring any Fringe Benefits Tax liability.
The Australian Taxation Office ("ATO") released Draft Taxation Ruling TR 2007/D6 on 27 June 2007, which highlighted the fact that the exemption now gives opportunities for employers to spend much more on the provision of entertainment fringe benefits to their employees. This applies to employers who adopt the actual method of accounting for entertainment expenditure for the whole FBT year, which requires them to record the actual costs of the provision of the entertainment.
This benefit is particularly helpful as we are approaching the Christmas festive season where expenditure can be up to $300 per employee before a FBT liability is incurred. Each associate of the employee can also be provided a benefit up to the value of $300, which also receives the full FBT exemption treatment.
The provision of a gift to the employee at a Christmas party, while treated as an associated benefit of the dinner, is taken into consideration separately from the dinner in calculating whether the minor exemption threshold applies. If both the values of the Christmas party and the gift to the employee is less than $300, then they will both be considered to be exempt benefits.
The costs associated in providing food and drink on a ‘working day on the employer’s business premises and consumed only by current employees’ is fully exempt from FBT. This includes Christmas parties. Where associates of the employee attend such parties, a taxable fringe benefit will arise if the value of their benefit exceeds the exemption threshold.
It is not all good ideas unfortunately! An income tax deduction is not available for the provision of entertainment even if they are exempt minor benefits not subject to FBT.
This change in legislation is a great opportunity to reward employees for a year of hard work as employers can now triple the spending per employee without incurring any fringe benefits tax.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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